• Exemption for interests in certain FIFs resident in the United States

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    An exemption is available for your FIF interests in:

    • an entity that is treated as a corporation and is subject to tax on its worldwide income, and
    • a company or trust that is treated as a regulated investment company or real estate investment trust

    for the purposes of the United States Internal Revenue Code 1986.

    Subject to the conditions outlined below, an exemption is also available for your FIF interests in:

    • a limited partnership or a limited liability company formed under a United States law or United States state law, and
    • a common trust fund recognised under the United States Internal Revenue Code 1986. [subsection 513(2)]

    Note: 'Entity' in the following text refers to limited partnerships, limited liability companies and common trust funds.

    Your FIF interests in the entity are exempt if:

    • your interest in the entity is held for the sole purpose of investing in
      • a business conducted in the USA, or
      • real property located in the USA, and
       
    • the entity does not
      • have an interest in income or gains from non-USA sources
      • hold an interest in a FIF not resident in the USA, or
      • hold real property outside the USA. [subsection 513(3)]
       

    Alternatively, your FIF interests in the entity are exempt where:

    • the total value of the entity's interests in
      • income or gains from non-USA sources
      • non-USA FIFs, and
      • non-USA real property
       

    does not exceed 5% of the total value of all interests held by the entity in other entities, and

    • the value of assets held by the entity that
      • produce income from sources outside the USA, or
      • if disposed of would give rise to a gain from a source outside the USA
       

    does not exceed 5% of the value of assets held by the entity. [subsection 513(4)]

    Use the entity's accounting records to determine the values of FIF interests and assets when considering whether this condition for exemption is satisfied. [subsection 513(5)]

    Last modified: 04 Feb 2010QC 21777