I have a corporate client who has received a T5013 slip in the corporation’s name. Can anyone assist me with how to record it in the T2? Additionally, please advise if any journal entries need to be made in the accounting books. Your guidance would be greatly appreciated.
Looking back at previous postings, I have noticed that a lot of partnership threads have gone unanswered. This is completely understandable, as this topic is quite vast and has very broad treatments with regards to not only the type of partnership, but also the exposure to the partnership, and the type of entity (i.e. corporation) that is reporting that income. Hopefully I can shed some light on this for everyone.
- Oversimplified
Firstly, this should absolutely be included in any investment and investment income reconciliation on the accounting side long before the T2 is a consideration…
Assuming your client is a minority partner in a larger more common LP such as Brookfield, you will want to break out the tiered boxes by the type of “taxable”, and notional income that is being reported on the T5013. Essentially, this income should be accounted for in the same manner as any other generic investment income categories … i.e. dividend income to dividend income, interest income to interest income, TCG to TCG, and conversely reconciled with the applicable partnership investment account on your books.
For tax purposes - note, we are assuming a simplified T5103 reporting requirement as mentioned above … you will want to report the applicable income categories on the GIFI 125 as your normally would, and allocate the income categories to their respective schedules thereafter (S3, S6, S4, etc.). You will then reconcile the passive nature of the income on Schedule 7 (make sure you pick up the interest income and offset with any fees that were allocated on the T5013 here). There is no need to report this simplified, minority income on Part 4 of the Schedule 7, I am shutting down this myth right now.
- To expand on the above:
Part 4 reporting comes into play if the corporation is a professional member of the partnership, such as is with LLP’s, whereby there is a limited income reported in Box 10, and a prorated SBD has been allocated to the corporation by the specified partnership. This also entails a range of other requirements, such as a calendar year end, and a prorated income provision on Schedule 71/72 if you have a 10% or more interest in the partnership with a year end that differs from that of the partnership.
If your situation is the latter, you can always reach out to me personally for a more in depth discussion.
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Thank you very much, @Deepinthemoneycall . It was really helpful. My other question is, if there is a business loss reported on Box 10 of T5013, will it reduce the investment reported on the balance sheet?
Also, the amount reported in box 113 as a return of capital and the same amount deposited in the bank account reduce your investment on the balance sheet?
The ROC should reduce the book value, given a proper reconciliation was undertaken (although this can sometimes just be a plug). Box 10 should be reconciled to your schedule 4, this does not reduce the investments carrying amount.
Hope this helps.