Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
923426
XXXXXXXXXX Jim Wilson (613) 957-2123
Attention: XXXXXXXXXX
June 22, 1993
Dears Sirs:
Re: U.S. Limited Liability Companies
This is in reply to your letter of September 16, 1992, in which you asked whether Revenue Canada treats U.S. limited liability companies as corporations for purposes of the Income Tax Act (the "Act"). It is possible in certain U.S. states to incorporate a U.S. limited liability company. Such an entity may be characterized as a partnership for U.S. tax purposes such that the U.S. will tax the shareholders of the limited liability company as partners.
The appropriate treatment for purposes of the Act will depend on the particular law under which the limited liability company is organized. It is our understanding that there are presently over twenty-five states with such legislation. The limited liability companies in the two cases that we have reviewed, Wyoming and Florida, would be considered corporations rather than partnerships.
Where the U.S. limited liability company is considered a corporation for purposes of the Act and is a foreign affiliate pursuant to paragraph 95(1)(d) of the Act, a computation of its surplus accounts for purpose of the foreign affiliate regulations will be done in a manner similar to that of any other foreign affiliate. However, if any limited liability company is treated as a partnership for the purposes of the Internal Revenue Code (the Code) such that the shareholders ("partners") rather than the company are liable to tax under the Code on the income of the company, such company will not be considered to be a resident of the U.S. under paragraph 1 of Article 4 of the Canada-U.S. Income Tax Convention (the "Convention"). If such company's mind and management is in Canada, it will only be resident of Canada for the purposes of paragraph 1 of Article 4 of the Convention, paragraph 3 of Article 4 of the Convention will not apply and subsection 250(5) of the Act will not apply. The company will not be a foreign affiliate but will be taxed under the Act as a resident of Canada.
We trust you will find the above comments to your satisfaction and we apologize for the delay in replying.
Yours truly,
for Director
Reorganizations and Foreign Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch