Oct 20 1988
Specialty Ruling Directorate J.D. Jones 957-2104
SUBJECT: Subsection 1103(2d) of the Income Tax Regulations Further to our telephone conversation of October 5, 1988 (Marcotte/Jones) we are forwarding the enclosed correspondence from XXXX dated July 26, 1988 to you for reply.
It is our view that subsection 1103(2d) of the Income Tax Regulations (the "Regulations") could apply to dispositions of property by a partnership since a partnership is, in our view, a "taxpayer" for the purposes of subsection 1103(2d) of the Regulations because:
(a) although a partnership is not a person, by virtue of paragraph 96(1)(c) of the Income Tax Act (the "Act") it computes its income as if its activity "... were carried on by the partnership as a separate person..."; and
(b) "taxpayer" is defined in subsection 248(1) of the Act to include any person.
The problem, as we see it, is that there appears to be an anomaly with respect to subsection 1103(2d) of the Regulations as it applies to partnerships in that the preamble refers to a taxpayer (which we consider to be the partnership, in this case) and it subsequently states that "... the taxpayer may, by letter attached to the return of his income filed with the Minister in accordance with section 150 of the Act, ...". Since a partnership does not file a return of income, we feel an administrative position is required in order that a partnership may make use of this election.
You may wish to consider an administrative practice whereby, an election filed pursuant to subsection 1103(2d) of the Regulations by a partnership should be filed in accordance with rules similar to those in subsection 96(3) of the Act. In addition, for administrative case, you may wish to require that the election be filed with the return of income of that member of the partnership whose return is required by section 150 of the Act to be the earliest return of Income to be filed of all the members of the partnership.
It would be appreciated if you would forward a copy of your reply to this Division.
ORIGINAL SIGNED BY
B.W. Dath Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernental Affairs Branch