Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Dear Sirs:
This is in reply to your letter of July 7, 1989, concerning a corporation whose only asset is an interest in a partnership in relation to the requirement in the definition of "small business corporation" in subsection 248(1) that all or substantially all of the fair market value of the assets be used in an active business.
While you have referred to question 51 (round table session) of the 1986 Tax Conference Report, our general position on this issue is now set out in paragraph 6 of IT-486R which states the following:
- "Where a corporation has a partnership interest as one of its assets, it is the underlying partnership assets (to the extent of the corporation's interest therein) that are used in determining whether all or substantially all of the corporation's assets are used in an active business. Provided that these assets are used in an active business carried on primarily in Canada by the partnership1 they will qualify."
Accordingly, in the situation you have described, it is the corporation's proportionate share of the fair market value of the underlying assets of the partnership that is taken into consideration in determining if the previously mentioned requirement in the definition of "small business corporation" has been satisfied.
We trust you will find the foregoing satisfactory.
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© Her Majesty the Queen in Right of Canada, 1989
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© Sa Majesté la Reine du Chef du Canada, 1989
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