Can a cooperative corporation, that is a member of a limited partnership, deduct patronage dividends computed on the basis of sales made by the partnership to its customers who are members of the cooperative corporation? In responding negatively, CRA stated:
A “customer” is defined in a relation to a taxpayer and must be a customer of that taxpayer.
[S]ubsection 96(1) … applies to treat a partnership as a separate person for the purposes of computing the income of each partner … . Accordingly, the deduction under section 135 of the Act must be computed at the partnership level on the basis of the allocations in proportion to patronage by the partnership to the partnership’s customers.