As a member of a partnership, you must report your share of the partnership’s profit or loss for its fiscal period ending in 2013.1 While you can normally claim your share of partnership losses against your other sources of income, this may not always be the case if you’re a member of a limited partnership.
Certain expenses incurred outside the partnership may also be deductible. For example, if you borrowed money to invest in the partnership, the interest on that loan is generally deductible. Any expenses that you personally incur in the course of carrying on the partnership business (e.g., promotional and automobile expenses) are also deductible. However, meal and entertainment expenses are only partially deductible, and some automobile expenses may be limited.
Although the Act requires that all Canadian partnerships file an information return (Form T5013), the CRA has previously administratively exempted certain partnerships from this requirement. Prior to 2011, a partnership with up to five partners was not required to file the prescribed information return (T5013) unless one of the partners was another partnership.
The CRA’s position has changed as follows for partnerships with fiscal periods ending after 2010: a partnership is required to file an information return if, at the end of its fiscal period, it has an absolute value of gross revenues plus an absolute value of expenses of more than $2 million, or has more than $5 million in assets. A return also has to be filed if, at any time during the fiscal period, the partnership is a tiered partnership; the partnership has a corporation or a trust as a partner; the partnership invested in flow-through shares of a principal-business corporation that incurred Canadian resource expenses and renounced those expenses to the partnership; or if the CRA requests that a return be filed.
As a result, although it’s still a good idea to file the return, partnerships that have simple structures and modest financial activity are not required to file a partnership return.
1 Special rules for corporate partners