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Partnership Withdrawal Creates a Paragraph 12(1)(l.1) Anomaly


Area Tax


Article originally published in the Canadian Tax Focus, Volume 5, Number 4, November 2015

Excerpt from "Partnership Withdrawal Creates a Paragraph 12(1)(l.1) Anomaly":

The CRA has confirmed (in TI 2015-0567811E5, July 28, 2015) that partners that withdraw from a partnership before the partnership’s fiscal year-end may have a paragraph 12(1)(l.1) income inclusion, even if none of the partnership’s income for the fiscal year is allocated to them. This anomalous result can occur when a corporation or trust withdraws before fiscal year-end from a partnership that has outstanding debts to specified non-residents. Timing the withdrawal to coincide with the fiscal year-end can avoid this problem.

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