Special release - Investment Clubs

IC Subject: SPECIAL RELEASE Investment Clubs

Date: April 6, 1992

No: 73-13

The purpose of this special release to Information Circular 73-13, dated May 16, 1973, is to reflect the change in reporting requirements for investment clubs that elect to be taxed on the "modified partnership basis." For 1991 and subsequent taxation years, these clubs should use Form T5013, "Partnership Information Return", instead of Form T3, "Trust Income Tax Return and Information Return". Also, where the circular refers to the capital gains inclusion rate, the rate applicable to the 1990 and subsequent taxation years of three-quarters replaces one-half which was applicable for the 1987 and prior years. The rate for the 1988 and 1989 taxation years was two-thirds.

1. In line 2 of paragraph 10, replace "one-half" with "three-quarters."

2. In line 4 of paragraph 11, after Form T3, add "(or on the T5013 Supplementary form for taxation years ending after December 31, 1990)."

3. In line 11 of paragraph 11, after Form T3, add "(or on the T5013 Supplementary form for taxation years ending after December 31, 1990)."

4. In line 4 of paragraph 12, replace "one-half" with "three-quarters."

5. In line 8 of paragraph 13, after Form T3, add "(or on the T5013 Supplementary form for taxation years ending after December 31, 1990)."

6. In line 4 of paragraph 14, after T3 Return, add "or Form T5013, Partnership Information Return, for taxation years ending after December 31, 1990." PAGE 2 7. Replace the first sentence of paragraph 15 with the following:

"For taxation years ending on or before December 31, 1990, an officer of the club ordinarily undertakes to file a T3 return for a taxation year (calendar year) as the agent for the members and to report therein the income of each member."

8. In line 9 of paragraph 15, delete "(one-half the capital gain or loss)."

9. Add the following to the end of paragraph 15:

"For taxation years ending after December 31, 1990, an investment club on the modified partnership basis should not use a T3 return to report to its members. Instead, it should file Form T5013, Partnership Information Return, with supporting schedules and supplementaries. See the current version of the Guide to the Partnership Information Return for details on how to complete that return and its related forms. If the club meets the "five or fewer members exemption" in paragraph 11(a) of Information Circular 89-5R, it does not have to file the partnership information return. However, it can still do so if all members agree. If the club does not file the partnership information return because it meets the "five or fewer members exemption," then each member must file with his or her tax return a complete set of financial statements and a statement of the amounts to be reported by that member. These statements are generally prepared by or on behalf of an official of the club."

10. In line 3 of paragraph 18, after T3 Return, add "(or Form T5013, Partnership Information Return, for taxation years ending after December 31, 1990)."

11. In line 6 of paragraph 21, after Form T3, add "(or on the T5013 Supplementary form for taxation years ending after December 31, 1990)."