For an individual, the taxation year is normally a calendar year (January 1 to December 31).

For a partnership, the fiscal period is a period of business activity of no more than twelve months that generally ends on December 31. At the end of the period, the partnership closes its books and prepares its financial statements.

A new partnership whose members are all individuals can elect to have a date other than December 31 as its fiscal period end date. The election must be filed by a designated member of the partnership. If a different end date is chosen, it must be the same as the one chosen for federal purposes.

If the fiscal period of the partnership you are a member of ends on a date other than December 31, complete form TP-80.1-V, Calculation of Business or Professional Income, Adjusted to December 31, and calculate your own estimated additional income each year.

Net partnership business income is generally calculated using the accrual method of accounting. Under the accrual method, you:

• report the partnership's income in the fiscal period the income was earned, regardless of whether the income was received during that period
• deduct the partnership's expenses in the fiscal period they were incurred, regardless of whether the expenses were paid during that period

If you are a member of a partnership, you must report your share of the partnership's net income, even if that share has not been paid to you or credited to your capital account.

The partnership's gross income for income tax purposes must be identical to the amount shown on its financial statements. Net income may differ where a given type of income or expense is treated differently for accounting purposes than it is for income tax purposes, as in the case of:

• expenses relating to an office in a partner's home
• entertainment expenses
• charitable donations
• the cost of products intended for sale but consumed by a partner or by members of the partner's family
• expenses relating to the use of an automobile

As a member of a partnership, you have to know the partnership's net business income in order to correctly calculate your share of the income. When calculating the partnership's net business income, you must first determine which amounts to include and any deductible expenses.

Amounts to include

The following are some of the amounts that must be included when calculating the partnership's business income:

• the proceeds of sales (including commissions)
• the value of any property or service exchanged in a barter transaction (barter refers to the practice of exchanging one property or service for another without the use of money)
• all amounts claimed as a reserve in previous years
• all amounts or benefits received during the year
• the value of vacation trips or gifts offered as remuneration for work carried out in the partnership's business
• grants, subsidies or other forms of financial incentive received from a government or from a government agency or a non-government agency (except an amount already included in income or deducted in the calculation of a balance of expenses for the current or a previous fiscal period or an amount used to reduce the cost of property or the amount of an expense)
• interest

Deductible expenses

Any reasonable expense incurred to earn business income can generally be deducted. The following are some expenses that are not deductible:

• investments
• capital expenditures or capital losses
• reserves (also called "contingent accounts" or "sinking funds"), unless their deduction is expressly permitted under the Taxation Act
• expenses incurred to establish a business, before operations actually begin

See the guide Business and Professional Income (IN-155-V) for more information about deductible expenses. The guide provides information about:

• the cost of goods sold
• business taxes and licences
• the premium paid for professional liability insurance required to maintain professional status
• the cost of labour and equipment required for the maintenance and repair of property used to earn business income
• eligible renovation or alteration expenditures to improve access to a building
• salary or wages paid to a child or a spouse
• meal and entertainment expenses
• motor and zero-emission vehicle expenses (travel expenses, interest on a loan for the purchase of a motor vehicle, capital cost allowance, leasing expenses, etc.)
• expenses related to the business use of your home

Determining the share of net income

When calculating your share of the partnership's income (or loss), you can deduct the expenses you incurred in connection with that income (or loss), provided the expenses:

• are not included in the partnership's expenses
• are deductible only by you
• are not reimbursed to you

If you are a partner other than a limited or silent partner, you can use form TP-80-V, Business or Professional Income and Expenses, or form TP-80.AP-V, Farming or Fishing Income and Expenses, to calculate your income and expenses.

How form TP-80-V or TP-80.AP-V must be completed depends on whether you received an RL-15 slip (see courtesy translation RL-15.EX-T) from the partnership. Forms TP-80-V and TP-80.AP-V help you complete Schedule L of the income tax return, which is used to determine gross partnership income and your share of the net partnership income (or net partnership loss).

If you received an RL-15 slip and you use form TP-80-V, complete the form as follows:

• Complete Part 1.
• On line 252, enter the amount shown in box 1 of the RL-15 slip.
• Complete parts 7 and 8 (if applicable).
• On lines 253 through 264, calculate your net income (or net loss) for the fiscal period.

If you received an RL-15 slip and you use form TP-80.AP-V, complete the form as follows:

• Complete parts 1 and 3.
• Complete Part 5 (if applicable).
• In Part 4, calculate your net income (or net loss) for the fiscal period.

If you did not receive an RL-15 slip and you use form TP-80-V, complete the form as follows:

• Complete Part 1.
• In Part 2, enter the additional information about the partnership.
• In Part 3, calculate the partnership's income and expenses and your net income (or net loss) for the fiscal period.
• Complete Part 6 and any other parts of the form that apply to your situation.

If you did not receive an RL-15 slip and you use form TP-80.AP-V, complete the form as follows:

• Complete Part 1.
• In Part 2, calculate the partnership's income and expenses for the fiscal period.
• In Part 3, calculate your income and expenses for the fiscal period as a member of the partnership.
• In Part 4, calculate your net income (or net loss) for the fiscal period.
• Complete any other parts of the form that apply to your situation.

For more information about a partnership's obligation to file RL-15 slips, see Requirement to file an information return.

For more information about business income, see the guide Business and Professional Income (IN-155-V) and the instructions for line 164 in the guide to the income tax return (TP-1.G-V).