Allocation of Amounts Among Partners
Partnerships that are required to file an information return are also required to file RL-15 slips (see courtesy translation RL-15.EX-T) for its members (also called “partners”). Members use the information on the RL-15 slips to report, in their income tax return (or information return), the portion of the partnership's income or losses allocated to them.
As a rule, income, gains, losses, deductions, credits and other amounts are allocated among the partners in accordance with the terms of the partnership agreement.
However, the allocation of certain amounts must be determined on the basis of the percentage interest (also called “agreed proportion”), which is defined as the share of a partner in the partnership income (or losses) for the fiscal period.
Where the partnership income and loss for the fiscal period are both nil, the allocation must be made as if the partnership had an income of $1 million for the fiscal period.
The percentage interest must be entered in box 36 of the RL-15 slip. If an amount that gives entitlement to a tax credit must be allocated, the percentage interest used for the allocation must be entered in box 74. This percentage may be smaller than the percentage in box 36 if the partnership is an interposed partnership.
The amounts to be allocated among members based on their percentage interest are:
- the adjusted cost of a qualifying security within the meaning of the Cooperative Investment Plan (CIP) so that a member that is an individual may claim a deduction for strategic investments;
- the paid-up capital of a member corporation;
- the net income from logging operations used to calculate the logging tax (one third of this tax may be deducted from the income tax payable);
- amounts that may entitle members to tax credits, such as:
- the various R&D tax credits for salaries and wages, for university research or research carried out by a public research centre or a research consortium, for fees and dues paid to a research consortium and for private partnership pre-competitive research,
- the tax credit relating to resources,
- the tax credit for investment,
- the tax credit for investment and innovation,
- the tax credit for an on-the-job training period,
- the tax credit for the reporting of tips,
- the tax credit for taxi owners,
- the tax credit for training workers employed in small and medium-sized businesses,
- the tax credit for small and medium-sized businesses to foster the retention of experienced workers,
- the tax credit for small and medium-sized businesses that employ persons with a severely limited capacity for employment;
- the special income taxes relating to the above-mentioned tax credits;
- dividends from cooperatives received in the form of preferred shares and distributed to the members during a fiscal period.
The allocation of amounts among the partners may require other adjustments, based on whether or not the partners are specified members, or based on the type of income or loss, on the type of tax credit, etc.