2016-0642011E5 Functional currency election and partnerships

Principal Issues: Whether a partnership is required to file a T5013 partnership information return and related slips and summary information in the elected foreign currency if one or more of its corporate members has made a foreign currency election under subsection 261(3) to comply with the requirements of functional currency reporting under subsection 261(6) of the Act.

Position: Yes

Reasons: All of the information requested on a partnership information return is prescribed information pursuant to subsection 229(1) of the Income Tax Regulations.

Author: Teow, Christina
Section: 261(6) 261(3)

XXXXXXXXXX                                                                                                 2016-064201
                                                                                                                         C. Teow

May 31, 2016

Dear XXXXXXXXXX:

Re:  Filing obligations of a partnership – foreign currency election made pursuant to subsection 261(3)

We are writing in response to your email of April 13, 2016, concerning the functional currency reporting requirements for partnerships where a corporate partner has made an election under subsection 261(3) of the Income Tax Act (the “Act”).

In the hypothetical situation you describe, ACo and BCo are equal partners in a partnership. ACo has made a functional currency election under subsection 261(3) of the Act. The books and records of the partnership are kept in both Canadian dollars and in the functional currency. You have noted that CRA Document 2012-0471831E5 confirms that the information reporting under subsection 261(6) of the Act is considered prescribed information for purposes of subsection 229(1) of the Income Tax Regulations (the “Regulations”) and therefore, all the information required on the T5013, Partnership Information Return, and related summary and slips should be reported in the functional currency. In particular, you are asking for our views on the reporting obligations of the partnership.

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R7, Advance Income Tax Rulings, dated April 22, 2016.  Also, where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. Nonetheless, we have provided some general comments below.

Our Comments

Subsection 229(1) of the Regulations provides that every member of a partnership that carries on business in Canada or that is a Canadian partnership or a SIFT partnership at any time in a fiscal period of the partnership shall make for that period an information return in prescribed form containing information that may be required by the prescribed form. It is our view that all of the information required on the T5013, Partnership Information Return, and related summary and slips is prescribed information, in accordance with subsection 229(1) of the Regulations. Subsection 229(2) of the Regulations provides that, for purposes of subsection 229(1), an information return made by any member of a partnership shall be deemed to have been made by each member of the partnership.

As required by subsection 229(1) of the Regulations, if a foreign currency election is made pursuant to subsection 261(3) of the Act by a corporate partner, the partnership must file a T5013 Partnership Information Return, and related summary and slips in the elected functional currency with the Canada Revenue Agency. This requirement is explained in the T4068 Guide for the Partnership Information Return (T5013 Forms) in respect of the T5013 Partnership Information Return and related summary and slips when an election is made under subsection 261(3) of the Act by one or more corporate partners. Separate T5013 slips in Canadian dollars must be prepared by the partnership and provided to the non-electing partner(s) but these slips are not to be filed with the Canada Revenue Agency. However, copies of these slips are to be retained by the partnership as part of its books and records and are to be provided to the Canada Revenue Agency, upon request.

We trust that these comments will be of assistance.

Yours truly,

G. Moore
For Director
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without the prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5.

© Her Majesty the Queen in Right of Canada, 2016

Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistribuer de l'information, sous quelque forme ou par quelque moyen que ce soit, de façon électronique, mécanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.

© Sa Majesté la Reine du Chef du Canada, 2016