Principal Issues:
1) Can a unit trust invest in a limited partnership?
2) What is the meaning of "investing business"?
3) For purposes of subparagraph 108(2)(b)(iii) of the Income Tax Act (the "Act"), is a limited partnership looked through?
4) For purposes of subparagraph 108(2)(b)(iv) of the Act, is a limited partnership looked through?
5) Can a unit trust be more than 10% invested in a single limited partnership?
6) Does a limited partnership have to abide by the 10% limitation in subparagraph 108(2)(b)(v) of the Act?
7) May a unit trust lend more than 10% of its property to a single limited partnership?
8) Do the answers change if a unit trust invests in a general partnership instead?
Position:
1) Yes.
2) N/A.
3) Yes, unless the interest in the limited partnership is a marketable security.
4) Yes, unless the interest in the limited partnership is a marketable security.
5) Depends on circumstances.
6) No.
7) Depends on circumstances.
8) #1 and #2 differ.
Reasons:
1) Section 253.1 of the Act.
2) Section 253.1.
3) Partnership case law. Marketable securities are treated as separate investment under subparagraph 108(2)(b)(iii).
4) Partnership case law. Marketable securities treated consistently with treatment given under subparagraph 108(2)(b)(iii).
5) Look through the limited partnership.
6) Subparagraph 108(2)(b)(v) applies to the unit trust not the limited partnership.
7) If the loan qualifies as a security, the term "debtor" is broad enough to encompass a limited partnership.
8) Section 253.1 does not apply.