Four corporations form a new corporation to invest in real property. Each shareholder corp contributes money and receive profit in proportion to their ownership. Can this new corporation is treated as joint venture for tax? How is bookkeeping done for JV?
If it’s a corporation then they are shareholders. Their respective investments would have to be some share capital at a minimum and perhaps shareholder loans or debt above that. However, for tax purposes, a corporation has to be treated as a corporation. A JV has no special tax status.
A Joint Venture or Co Tenancy would generally arise when those 4 corporations directly invested together in the real property rather than holding property in the name of a new corporation.
If the structure was a JV or Co Tenancy, the JV would normally produce a set of financial statements which each entity would use to report their share of the income and expenses on their T2 return via a separate S125 and perhaps rental statement. Prior to 2011 a Joint Venture or Co Tenancy could have a stated year end to which each venturer would use the income and expenses from that period on their T2 return that crosses that same period. After 2011 the rules changed such that the income from the joint venture needs to be calculated for each taxpayer and reported as if it had the same fiscal year end as the entity involved in the joint venture. For instance, if 4 corporations had 4 different year ends, you would essentially need to prepare 4 year ends for the joint venture. Many corporate year ends were changed in back 2011 or 2012 in order to align with each other if they were involved in proper JV’s or Co Tenancies.
Anyway… after all this useless information … Kevin has the correct answer. If they are investing through a separate corporation, it’s pretty simple. That new corporate entity is responsible for all of the reporting. The parent corporations are merely shareholders.
@snoplowguy You should be a teacher, Wayne.
Then he’s obviously a natural!
Thanks for the kind words but I’m too much of an impatient, politically incorrect curmudgeon to teach anymore.
Thanks everyone! I have learned a lot