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

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

Last modified: 04 Feb 2010QC 21777