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Sunday, August 13, 2017

Good news! Grandfathering of LLP and LLLPs


Good news! The CRA appears to have partially mitigated the impact of their change (excuse me..."clarification") in position on LLP and LLLP entities. Until recently, their position had been that unless LLP and LLLPs were converted to LPs before the end of 2017 then they would be treated as corporations, which would mean double taxation. Now, an updated position indicates that LLPs and LLLPs created prior to April 26, 2017 can continue to be treated as a partnership...with constraints and limitations. This is my understanding, and not legal or accounting advice!

“After an analysis of the complexities for taxpayers and the tax administration of transition from partnership filings to corporate filings, the CRA has decided to build on the prospective approach referred to in the November 2016 CTF announcement by offering administrative grandfathering. In particular, the CRA will be adopting the administrative practice of allowing any such entity formed before April 26, 2017 to file as a partnership for all prior and future tax years, provided none of the following conditions applies: One or more members of the entity/and or the entity itself take inconsistent positions from one taxation year to another, or for the same taxation year, between partnership and corporate treatment;
There is a significant change in the membership and/or the activities of the entity; or
The entity is being used to facilitate abusive tax avoidance.”

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