Income Inclusions for Corporations that are Members of Partnerships (Schedule 71, 72 and 73)

These schedules allow you to calculate the income additions and deductions under sections 34.2 and 34.3 of the Income Tax Act (ITA). Schedule 71 is a worksheet that should be completed by corporations that are members of single-tier partnerships, while Schedule 72, also a worksheet, should be completed by corporations that are members of multi-tier partnerships. A single-tier partnership is a partnership that is not a member of another partnership, whereas a multi-tier partnership is a partnership that is a member of another partnership.

Under section 34.2 of the ITA, when a corporation earns income through a partnership whose fiscal period does not coincide with the taxation year of the corporation, the corporation is required to calculate the adjusted stub period accrual (ASPA). The stub period corresponds to the period included between the end of the partnership’s fiscal period that ended in the corporation’s taxation year, and the corporation’s taxation year end. Also, a corporation that becomes a member of a partnership during the partnership’s fiscal period that starts in the corporation’s taxation year and ends after (i.e. a new corporate member of a partnership) may designate a lesser amount than the ASPA as an income inclusion. These amounts are calculated respectively in Parts 2 and 3 of Schedule 71 and 72.

Under section 34.3 of the ITA, when the corporation made, in the preceding taxation year, a discretionary designation that was too high to reduce its ASPA, the corporation might have to include an income shortfall amount as well as an additional income inclusion amount if the shortfall is above a 25% threshold. These amounts are calculated in Part 4 of Schedules 71 and 72.

Schedule 73 is a summary form that is then used to group the amounts that should be added or deducted in the corporation’s income. The amounts to include or deduct in Schedule 73 come from the corresponding parts in Schedules 71 and 72.

Operation of the Alberta button

An option has been added to Schedules 71 and 72 to allow you to create a copy for Alberta containing all the federal data for the partnership. This copy will allow you to make changes to certain amounts that may differ for Alberta tax purposes. Note that if all of the partnership amounts for Alberta are the same as the federal amounts and the federal net income is the same as that of Alberta, you are not required to create copies for the Alberta calculations; all amounts will update to the proper locations both at the federal and provincial levels. However, as soon as you create a provincial copy to enter one or more amounts that differ from the federal values, you must create a provincial copy for each federal copy created. In that case, only the provincial copies will be used in the Alberta calculations and the federal calculations will not take the provincial copies into account.

When you first click the Alberta button, a copy corresponding to the federal copy will be created for Alberta and all amounts on the federal copy will be transferred to the provincial copy. You will be able to modify certain amounts in the provincial copy, if applicable. If you click the Alberta button again, all modifications to the federal copy will be updated to the provincial copy. However, if you had modified certain values in the provincial copy, the fields containing those values will not be updated with the amounts from the federal copy.

Note that zero is considered as a value. If an amount should be nil on a line in a provincial copy, do not simply delete the entry. Enter “0” in this provincial copy, using an override, for the value to be retained should you click the Alberta button again. Otherwise, the amount in the federal copy will be transferred again to the provincial copy when you click one of these buttons.

Note: During a subsequent year, in the provincial copies, the rolled forward data will not be replaced when you click the Alberta button. Only new data entered in the federal copies will be transferred to their respective linked copies.