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:
Re: Section 16.1 of the Income Tax Act (the "Act")
This is in reply to your letter of April 30, 1991 wherein you requested to be informed of the Department's policy on how section 16.1 of the Act applies to partnerships. We apologize for the delay of this response.
Your concerns with the section as it pertains to partnerships were expressed as follows:
Will the Department permit a partnership which is a lessee to make an election pursuant to section 16.1 of the Act and accept such an election as valid? If this is the case, what is the taxation year of the partnership, which includes the time at which the lease was entered into? Lastly, how would the corresponding form T2145 be filed, as it pertains to the lessee i.e. the partnership?
Opinion
In response to your first question, the Department considers a partnership/lessee to be a taxpayer for purposes of section 16.1 of the Act for the following reasons. The section pertains to a taxpayer and in accordance with the definition of the word "taxpayer" found at subsection 248(1) of the Act, a "taxpayer includes any person whether liable or not to pay tax" (underlining is the writers). In addition, subsection 96(1) of the Act states that, "Where a taxpayer is a member of a partnership his income ... shall be computed as if (a) the partnership were a separate person resident in Canada ..." Since the purpose of section 16.1 of the Act is "... for the purpose of calculating the income of the lessee ...", and in this situation we are dealing with a partnership/lessee it follows when applying this section in unison with that of paragraph 96(1)(a) of the Act, that a partnership for purposes of calculating the income of a partner shall be considered a separate person, and that the Partnership as a separate person is capable of making the election under section 16.1 of the Act.
With regards to your query as to the taxation year which would apply in a situation which includes a partnership/lessee, the Act is very clear where it states at section 16.1 of the Act, "... for their respective taxation years that include the time at which the lease was entered into ...". However for a partnership/lessee, since each partner files its own income tax return and the partnership will not file a return of income on its own, the partner who is first required to file an income tax return after the election is made will be required to file the election with its income tax return.
We trust that our comments will be of assistance to you.
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