Methods of taxation applicable to FLPs

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End of attention

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

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

Choosing the taxation method

The deemed rate of return method is applied to your interest in an FLP unless you elect to use the cash surrender value method. [subsections 536(1) & (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)]