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PUBLIC PENSION PLANS - Canada Pension Plan - Calculations - Contributory self-employed earnings

Thursday, July 12, 2018 @ 9:49 AM  


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Appeal by the taxpayer from a Tax Court decision dismissing the appellant’s appeal from a reassessment and confirming that he was liable for a CPP contribution in relation to income allocated to him after he retired from a partnership. The appellant retired in 2007. In 2008, he was allocated income from the partnership as provided in the applicable partnership agreement. He included this income in his tax return for 2008 but did not include any amount for a CPP contribution payable in relation to the income that was allocated to him. The Tax Court judge found this income fell into the category of business or professional income pursuant to s. 96(1.1) of the Income Tax Act and that the Minister was correct in including it in the calculation of his self-employed earnings for the purposes of ss. 13 and 14 of the CPP.

HELD: Appeal allowed. In order for the income allocated to the appellant to be considered to be his self-employed earnings, it would have to be income from a business that was carried on by him. Since he had ceased to be a member of the partnership in 2007, he ceased to carry on business in common with the other members of a partnership at that time and was not carrying on a business in common with other partners at any time in 2008 for the purposes of the CPP. The deeming rule in s. 96(1.1) of the Income Tax Act did not deem him to be a member of the partnership or to be carrying on business for the purposes of the CPP. Since there was no other provision that would deem him to be a member of the partnership or to be carrying on business for the purposes of the CPP, he would not be a member of the partnership in 2008 for the purposes of the CPP and he would not be carrying on a business in 2008 for the purposes of s. 14 of the CPP. The income that was allocated to the appellant by the partnership for 2008 was not self-employed earnings for 2008 for the purposes of s. 14 of the CPP as this income did not arise from a business that he was carrying on in 2008.

Freitas v. Canada, [2018] F.C.J. No. 577, Federal Court of Appeal, W.W. Webb, M.J.L. Gleason and J.B. Laskin JJ.A., June 4, 2018. Digest No. TLD-July92018007