Canadian Resident Partnership

Administrative Policy

17 May 2022 External T.I. 2021-0884651E5 - Cost Recovery Method in IT-426R (Archived)

“Canadian resident partnership” is not a person “resident in Canada”

A limited partnership with both resident and non-resident partners, but with its central management and control in Canada (so that it was a “Canadian resident partnership” as defined in s. 248(1)) sold a somewhat small (under 5%) shareholding of a US target company on terms that included an earnout. In finding that the partnership would not satisfy various requirements of IT-426R, para. 2 for use of the cost-recovery method, including the requirement of subpara. 2(f) that “[t]he vendor is ... resident in Canada” - CRA stated:

The definition of “Canadian resident partnership” … is not relevant for the application of [subpara. 2(f)] … . Moreover, a limited partnership is not a person resident in Canada for the purposes of the Act (although it is deemed to be a separate person resident in Canada for limited purposes in subsection 96(1)) … .

Words and Phrases
resident in Canada
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(g) a limited partnership selling shares on an earnout basis cannot utilize the cost-recovery method 383
Tax Topics - Income Tax Regulations - Regulation 229 - Subsection 229(1) T5013 return is not a return of income 128
Tax Topics - Income Tax Act - Section 96 - Subsection 96(1) - Paragraph 96(1)(a) “Canadian resident partnership” is not a person “resident in Canada” (although it is resident for income computation purposes) 160