Partnerships

For the LNG income tax, tax is imposed at the partner level and not on partnerships. This means that at the end of the partnership's fiscal period, the partnership must determine its income or loss from business or property, income from other sources in respect of liquefaction activities at an LNG facility, specific deductions in certain circumstances, capital investment account balance, adjusted capital investment account balance and any eligible closure expenditures. These amounts are then allocated to each partner.

This leaves the partnership with no income or loss and no balance in its capital investment account or its adjusted capital investment account at the end of every fiscal period.

For example:

Partnership AB determines the following:

  • Income from business or property = $1,000
  • Income from other sources = $300
  • Specific deductions in certain circumstances = $200
  • Capital investment account balance = $3,000
  • Adjusted capital investment account balance = $2,000

If partner A is allocated 60% and partner B is allocated 40% of the partnership income and balances, then partner A would calculate their tax return based on:

  • Income from business or property = $600
  • Income from other sources = $180
  • Specific deductions in certain circumstances = $120
  • Capital investment account balance = $1,800
  • Adjusted capital investment account balance = $1,200

and partner B would calculate their tax return based on:

  • Income from liquefaction activities = $400
  • Income from other sources = $120
  • Specific deductions in certain circumstances = $80
  • Capital investment account balance = $1,200
  • Adjusted capital investment account balance = $800

A partnership return must be filed for each partnership and each partner is responsible for calculating their tax liability and filing an LNG income tax return.

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Sharing Partnership Amounts

As a member of a partnership, you may have agreed to share in your partnership’s income, loss, deductions, balances or expenditures.

The amount of your share is usually determined by a partnership agreement.

If you are not dealing with the other partners in your partnership at arm’s length, your share amount in an income, loss, deduction, balance or expenditure must be, despite any agreement, considered reasonable in the circumstances.

In the case of the partnership’s capital investment account, if the balance is positive, you are considered to have acquired capital investment property. If the balance is negative, you are considered to have disposed of capital investment property.

Acquiring and Disposing of Partnership Interest

If you acquire an interest in a partnership, you are considered to have acquired capital investment property with a capital cost equal to your share of the fair market value of the partnership’s capital investment property at that time.

If you dispose of an interest in a partnership, you are considered to have disposed of capital investment property for proceeds equal to your share of the fair market value of the partnership’s capital investment property at that time.

Acquiring and Disposing of Partnership Property

If property is acquired or disposed of between a partnership and a member of that partnership, the proceeds or cost of that property is considered to be the fair market value at that time.

Leaving a Partnership

If you cease to be a member of the partnership during the year, you are still considered to be a member of the partnership at the end of the fiscal period for the purpose of determining your share of the profit or loss and your tax liability from liquefaction activities.

Ceasing a Partnership

The fiscal period of a partnership is deemed to have ended when the partnership ceases to exist. However, the partnership is deemed to exist until all partnership property and any substitutions are distributed to the appropriate people as required by law.