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.
Revenu Canada Taxation Head Office
XXX
R. Albert (613) 957-2098
FEB 23 1989
Dear Sirs:
Re: Scientific Research and Experimental Development ("SR & ED")
We are responding to your letter of January 5, 1989 wherein you requested a technical interpretation relating to SR & ED expenditures and corresponding investment tax credits ("I.T.C.") as they relate to partnerships.
In the case of a partnership which undertakes SR & ED, we agree that, for purposes of paragraph 37(7)(e) of the Income Tax Act (the "Act"), the reference to "taxpayer" refers to the partnership. However, in our view, references to "taxpayer" in subsection 37(1) of the Act also refer to the partnership.
With respect to SR & ED benefits available to a partner, section 96 of the Act provides general rules for determining the income or loss of a partnership and its members. Under subsection 96(1) of the Act, the income or loss of a partnership is calculated at the partnership level and is then allocated to the partners in accordance with their respective interests in the partnership. Paragraph 96(1)(g) of the Act, as amended by Bill C-139, provides that, in calculating the loss to be allocated to a "specified member" of a partnership, the loss of the partnership will be reduced by the SR & ED expenditures deducted by the partnership by reason of section 37 of the Act. Similarly, subsection 127(8) of the Act, as amended by Bill C-139, excludes from the allocation of I.T.C. to a "specified member" of a partnership any I.T.C. earned in respect of SR & ED expenditures made by the partnership. Pursuant to the definition in subsection 248(1), a "specified member" of a partnership is defined to include a limited partner. Accordingly, these recent amendments to the Act effectively deny to limited partners any losses of a partnership resulting from SR & ED expenditures and any I.T.C. relating to SR & ED expenditures.
We trust that these comments will be of assistance.
Yours truly,
for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch
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