Regulation 2601

Subsection 2601(1)

Administrative Policy

7 October 2011 Roundtable, 2011-0411911C6 F - Exploitation entreprise par SP

property income of partnership is taxable only to partner (as to its share) in its province of residence

To the extent that a Quebec partnership does not carry on business, is the property income earned by it taxable only in each partner's province of residence pro rata to each partner’s interest? CRA responded:

… ITR subsection 2601(1) provides that if an individual resides in a particular province on the last day of a taxation year and has no income for the taxation year from a business with a permanent establishment outside the province, the individual’s income earned in the taxation year in the particular province is the individual’s income for the taxation year.

Consequently, where a partnership derives income during a taxation year that is not from a business, we are of the view that ITR subsection 2601(1) would apply and the income as computed under ITA subsection 96(1) should be allocated to the partners of the partnership pursuant to the partnership agreement. That income would retain its nature in the hands of the partners and be taxable in the province of residence of each partner of the partnership.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 Quebec partnership need not carry on business 188

26 October 1989 Memorandum (March 1990 Access Letter, ¶1152)

Individuals who do not carry on business in Canada and who are not actually resident in Canada but who are deemed resident in Canada under the sojourning rule do not fall within the ambit of s. 2601 because they do not actually resident in a province at the end of the year. Therefore, such individuals will not have any "income earned in the year in a province".


H. Michael Dolson, "Trust Residence After Garron: Provincial Considerations", Canadian Tax Journal, (2014) 62:3, 671-99.

Structuring so that decisions are made in a different jurisdiction (pp. 692-3)

Once the identity of the person who has central management and control is ascertained, the residence of the trust can be resolved by identifying the place where J that person exercises the powers constituting central management and control. Typically, this would be the place in which the person exercising these powers is resident, but that will not necessarily be the case. In a situation where very little management or control of trust property is required (as might be the case if substantially all of the assets of the trust consist of preferred shares of a private corporation), it might be possible for the person who has central management and control to ensure that central management and control is exercised in a province or country other than the province or country in which that person resides. One must caution, however, that this will require the decision making in connection with the trust property to be taken in a more formal manner than might otherwise be the case.

Alternative ordinary-location-of-decision-makers test (p. 693)

An argument could be made that the comments of the courts in Garron that the determination of central management and control is factually driven, and that there is a "line to be drawn," combined with the comments of the courts that the central management and control test for trusts is "similar" to the central management and control test for corporations, means that the central management and control test is to be applied as a de facto control test. In this interpretation of the decisions in Garron, the actual act of making decisions and the place where those decisions are made is disregarded, while paramount importance is placed on the ordinary location of the persons who effectively control the decision making for the trust.

Inappropriateness of ordinary-location test (p. 694)

I strongly disagree…

The use of a formalistic central management and control test for corporations and a de facto central management and control test for trusts would undermine the neutrality principle upon which the decisions in Garron are premised. ...

[I]f the courts intended trust residence to be based on the place of residence of the individual with de facto control, as opposed to the place where decisions are made, the courts would know how to articulate such a test.

Application of corporate central management and control test (pp. 694-5)

[O]nce the elements of control in respect of the trust property have been ascertained, it is the place from which that control is exercised that is relevant, and not the day-to-day location of the "controller." If it can be proved that control is exercised at a meeting in a particular jurisdiction, then, by analogy to a corporation and the making of decisions in the place where the board of directors meets, central management and control is situated in that particular jurisdiction. Again, this may require a more formal decision-making process…

[T]he question of provincial residence should be resolved by answering three questions of fact:

  1. What bundle of rights constitutes control of the property owned by the trust?
  2. Who is the person exercising or dictating the exercise of the rights that constitute control of the trust property?
  3. From where does this person exercise those rights or dictate the exercise of those rights on the last day of the taxation year?

If the answer to question 3 is that the rights are exercised in the particular province on the last day of the taxation year, the trust is resident in that province in the year.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 2 - Subsection 2(1) 108

Subsection 2601(2)


Hollinger v. M.N.R., 73 D.T.C. 5003, [1972] C.T.C. 592 (FCTD)

share of profits from foreign bottling partnership was business, not property, income

The taxpayer was an individual resident in Quebec who took the position that her share of income earned by a New Jersey partnership engaged in bottling soft drinks was income from property, so that she was not subject to tax pursuant to Reg. 2601(2). In rejecting this position, Noël, ACJ stated (at p. 5008):

The source here is clearly, a business source. If income from property has any meaning at all, it can only mean the production of revenue from the use of such property which produces income without the active and extensive, business-like intervention of its owner or someone on his behalf. I have in mind, for instance, property such as bonds or debentures or shares or real property which do not require the exertion of much activity or energy in order to produce the revenue. There is no question that the appellant has entered into a partnership here with her mother and sister and this partnership is clearly operating a business from which she receives her share of the profits. …

Words and Phrases
income from property

Administrative Policy

28 September 2020 External T.I. 2019-0800551E5 - Provincial Residency of a TFSA Trust

office of investment manager was PE to which securities trading income of TFSA was allocated

When asked where a self-directed TFSA was resident, CRA indicated that the trust would always be resident where its central management and control was factually exercised by the trustee – irrespective of the level of involvement of the TFSA holder in the decisions. However, CRA went on to indicate that where the administrative and investment functions of the plan had been largely delegated by its trustee, who was a trust company, to an investment firm, it would consider the central management and control of the trust to be exercised at the office where that firm carried out its delegated functions. Furthermore, if the TFSA carried on a taxable securities trading business, for purposes of determining the income of the trust that was allocable to a provincial permanent establishment of the trust, the:

TFSA trust will have a permanent establishment in a province if the TFSA trust carries on business in that province through an agent of the trustee who has a fixed place of business.

It went on to indicate that this would be the case in the situation described of substantial delegation of the trustee’s management and administrative functions to an investment firm.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 2 - Subsection 2(1) central management and control of a TFSA trust is generally exercised in the office of the investment firm to which most of the trustee’s functions have been delegated 325
Tax Topics - Income Tax Regulations - Regulation 2600 - Subsection 2600(2) office of investment manager of TFSA treated as a PE of the TFSA 343