Methods of taxation applicable to FLPs

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End of attention

You must work out FIF income for an interest in a FLP using either:

• the deemed rate of return method, or
• the cash surrender value method.

Choosing the taxation method

You would generally use the deemed rate of return method for your interest in a FLP. However, you may elect to use the cash surrender value method. [SUBSECTION 536(2)]

If you elect to use the cash surrender value method, you must also elect to use a notional accounting period for the FLP that coincides with the period for which the cash surrender values are available. [SECTION 487 and SUBSECTION 536(3)]

An election to apply the cash surrender value method is irrevocable. [SUBSECTIONS 487(3) and 536(5)]