Partnerships that are subject to Specified Investment Flow-Through (SIFT) tax

Partnerships have to pay income tax in monthly instalments when the total of Part IX.1 tax payable for either the previous year or the current year is more than $3,000.

If a SIFT partnership is liable for tax under Part IX.1 for a tax year, the amount of income that will be subject to tax in the hands of the members of the partnership under Part I will be reduced. This is because paragraph 96(1.11)(a) modifies the wording of paragraph 96(1)(f) where Part IX.1 tax is payable so as to reduce the allocation of partnership income to a member of the partnership by an amount representing the member's share of the taxable non-portfolio earnings.

The difference between the partnership's taxable non-portfolio earnings for the tax year and the tax payable by the partnership for the tax year under Part IX.1 is deemed to be a dividend received by the partnership from a taxable Canadian corporation. This deemed dividend is allocated to the members of the partnership in the same proportion as the taxable non-portfolio earnings.

The result is that members of the partnership who are "residents of Canada" will be deemed to have received an "eligible dividend" that qualifies for the enhanced dividend tax credit (in the case of individuals) or that qualifies for inclusion in the general rate income pool (in the case of corporations). A partner that is a corporation resident in Canada may also be eligible for a dividend deduction under section 112.

The amount of "eligible dividend" is to be reported in box 132 of the T5013 slip.

For more information about SIFT partnerships, call 1-800-959-5525 or go to T5013-FIN Partnership Financial Return.

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