[BUYING AND SELLING REAL ESTATE IN CANADA - QUÉBEC]
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case of a general partnership, or the general and limited partners in the case of a limited partnership. General partnerships do not usually require any other formality in order to be created, whereas a limited partnership generally exists only from its registration date. The partnership agreement or limited partnership agreement, as the case may be, takes the place of the certificate and articles of incorporation and by- laws, and will govern the issuance of partnership units and the operations of the entity. Typically, in a limited partnership, the general partner (which is often a shell corporation) is responsible for all the obligations and liabilities of the limited partnership. The liability of the limited partners is restricted to the amount of their respective contributions, provided that they do not become involved in the management of the limited partnership. To retain limited liability protection, the limited partner must remain a passive investor rather than an active participant in the operation of the limited partnership. Both general and limited partnerships formed under Québec law or carrying on business in Québec must register with the REQ and provide information analogous to that required of a corporation. Trusts A trust carrying on a commercial enterprise, such as a business, investment, or real estate trust (whether or not profitable), which is not managed by a registered trustee (such as a trust company) must also register with REQ in the same manner as a sole proprietorship, partnership, or legal person (corporation) within 60 days of beginning operations. Under draft Canadian legislation expected to come into force in 2023, trusts will be required
to disclose information on each trustee, beneficiary, settlor and protector of the trust. This includes trusts which own residential properties both within and outside Canada, and those which own shares of private companies that are not currently paying dividends (both of which were previously exempt from the trust filing requirements). Bare trusts employed to hold registered title to real estate or other assets belonging to third parties, which may not be reflected by a formal trust deed, and which previously did not have to file tax returns, will be required to do so once the new rules come into effect. As a result of this change, more trusts will have to file an annual Canadian income tax return. The failure to do so could result in penalties for each missing year of up to 5% of the fair market
value of the trust’s assets, plus interest. Nominee or prête – nom agreements
Nominee or “prête - nom” agreements are commonly used in real estate transactions to register property in the name of a nominee corporation, which holds legal title only, with the beneficial ownership retained by the true owner(s). Nominee corporations are often used to collect rent and pay expenses, or to acquire family assets such as a residence. Even if already disclosed in the taxpayer’s tax return, all Québec taxpayers must file prescribed form TP-1079.PN disclosing all nominee agreements: • Signed on or after May 17, 2019, on the later of (i) 90 days following the date of signature and (ii) December 23, 2020; or • Signed before May 17, 2019, but having income tax consequences continuing on or after May 17, 2019 ( e.g., deduction of expenses, attribution of rental income, imposition of a capital gain, principal residence exemption claims, creation of tax attributes such as
ILN Real Estate Group – Buying and Selling Real Estate Series
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