Two corporations, each having a sole shareholder, are partners of a partnership ("S.E.N.C.") which, in turn, pays salaries directly to each such shareholder. How does s. 5(2)(b) of the Employment Insurance Act (providing that insurable employment does not include “the employment of a person by a corporation if the person controls more than 40% of the voting shares of the corporation”) apply? CRA responded:
[E]mployment with the S.E.N.C. is employment with its partners. Thus, no EI premium would be required in respect of the employment of the taxpayer controlling more than 40% of the voting shares of the corporation, which is a partner of the partnership.