On August 16, 2011, the Department of Finance (Finance) released for consultation draft legislative proposals to implement tax measures from the 2011 federal budget. These include measures to curtail income deferral by corporations using partnerships with misaligned year ends. Interested parties are invited to provide comments by September 16, 2011. Finance has indicated that Explanatory Notes will be released shortly.
Under the existing rules, a corporate partner must only include in income its share of the income (or loss) of the partnership for the partnership’s fiscal period that ends in the partner’s taxation year. As a result, corporate partners may benefit from a deferral of up to almost twelve months by adopting a different fiscal period for the partnership.
This Tax memo highlights certain clarifications to the budget proposals made by the draft legislation.