17 July 2002 Internal T.I. 2002-0145427 - LIMITED PARTNERSHIP

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues: Are the units of a limited partnership considered units of a

partnership?

Position: Yes

Reasons: Common Law requires that a partnership must exist before a limited

partnership can be registered.

		July 17, 2002

	Marge Weevers	HEADQUARTERS
	Problem Resolution Program	Bob Naufal, CMA
	Calgary Tax Services Office	(613) 957-2744

		2002-014542

Limited Partnerships

This is in response to the letter from XXXXXXXXXX (the "taxpayer"), dated May 28, 2002, whereby the taxpayer stated that the units of XXXXXXXXXX should not be considered as part of a partnership. In the letter, the taxpayer included excerpts from the Ontario Partnerships Act (R.S.O. 1990, c. P-5) (the "OPA"), the Ontario Limited Partnerships Act (R.S.O. 1990, c. L-16) (the "OLPA") and Canada Customs and Revenue Agency (CCRA) Interpretation Bulletin IT-90 What is a Partnership?

It is the taxpayer's position that the OLPA should be considered a "special or general Act in force in Ontario", and consequently companies or associations registered under the OLPA are not partnerships. We respectfully disagree with the taxpayer's conclusion and provide the following comments.

Section 2 of the OPA defines partnership as follows:

"...Partnership is the relation that subsists between persons carrying on a business in common with a view to profit, but the relation between the members of a company or association that is incorporated by or under the authority of any special or general Act in force in Ontario or elsewhere, or registered as a corporation under any such Act, is not a partnership within the meaning of this Act. R.S.O. 1980, c. 370, s. 2...".

[emphasis added]

To qualify for exclusion as a partnership, the provision requires a relation between members of:

(a) companies / associations that are incorporated by / under any special or general Act in force in Ontario; or

(b) registered as a corporation under such Act

In reviewing the provisions of the OLPA, it is clear that a limited partnership is not a company or an association which is incorporated under that Act, nor is a limited partnership registered as a corporation under that Act. The exclusion is, therefore, not applicable.

More generally, common law defines a company or corporation as an artificial person created by special authority (such as the Ontario Business Corporations Act) having authority under law to act as a single person distinct from the shareholders who own it. Similarly, an association can be defined as a group of persons formed for a specific purpose, such as an agricultural association formed for the purpose of advancing agriculture, pursuant to the Agricultural and Horticultural Organizations Act. While common law recognizes companies and associations as legal entities, a partnership is not considered a legal entity. Moreover, partnerships cannot be incorporated under law.

It is therefore our view that the units of XXXXXXXXXX are units of a partnership.

We trust these comments will be of some assistance.

Bruce Dodd
for Director
Business and Partnerships Division
Income Tax Rulings Directorate

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