Principal Issues: [TaxInterpretations translation] In calculating the capital of a corporation that is a member of a partnership, must amounts owed by the partnership to an agent of the government of Quebec that is a member of the partnership be deducted?
Position: Yes.
Reasons: Wording of paragraph 181.2(3)(g). The agent is a corporation for the purposes of the Act. The government of Quebec is a corporation for the purposes of the Act.
April 14, 2010
Montreal Tax Services Office Headquarters Large Businesses Audit Income Tax Rulings Directorate Attention: Jean Rousseau Mélanie Beaulieu (613) 957-9226
2009-034751
Part I.3 tax - Partnership
Unless otherwise indicated, all legislative references herein are to the provisions of the Income Tax Act (the "Act").
This is further to Marie-France Pleau's e-mail of November 9, 2009, in which she asked our opinion on Part I.3 of the Act. In particular, she indicated that you wished to know our opinion on the calculation of the capital of a corporation that is a member of a partnership at the end of the year under the rules in paragraph 181.2(3)(g).
Your question relates to a partnership (specifically, a limited partnership that we will refer to for the purposes here as the "LP") one of the members of which is the XXXXXXXXXX. You asked us whether amounts that are owed by the LP to XXXXXXXXXX should be considered to be amounts owed to a corporation that is a member of the LP for the purposes of subparagraph 181.2(3)(g)(i).
Our Comments
XXXXXXXXXX provides that XXXXXXXXXX is a legal person. Subsection 248(1) defines a corporation for the purposes of the Act as [TaxInterpretations translation of French definition] "except in the term “partnership”, means a legal person, including a company.” It therefore follows that XXXXXXXXXX, being a legal person under its incorporating statute, is a corporation for the purposes of the Act.
Furthermore, XXXXXXXXXX indicated that “XXXXXXXXXX”. It follows that XXXXXXXXX's interest in the LP as well as XXXXXXXXXX's claims against the SEC (i.e., the amounts owed by the LP to XXXXXXXXXX) are, by virtue of the XXXXXXXXXX, property of the Government. Therefore, it is the Government that must be considered for the purposes of subparagraph 181.2(3)(g)(i).
In our view, the Government is a legal person (endnote 1). As a legal person, the Government is also a corporation for the purposes of the Act.
Access to Information
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We hope that these comments are of assistance.
Manager of the Financial Sector and Exempt Entities Section
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch.
ENDNOTES
1 In this regard, we refer you to Patrice Garant, Droit administratif, 5th ed, Cowansville, Yvon Blais, 2004, pp. 27-38.