CRA accepts that an interest in an LP engaged in an active business is investment property for butterfly purposes

The butterfly rules as administered by CRA require a pro-rata distribution of each of the three types of property.  CRA recently accepted that the limited partnership interest of the distributing corporation (DC) in a limited partnership engaged in asset management was investment property rather than business property for these purposes, even though DC also partly owned the shares of the GP.  This may reflect an approach of treating the LP effectively the same as a corporation over which DC did not exercise significant influence, rather than as equivalent to a joint venture or other direct conduct of the management business.

Neal Armstrong  See summary of 2012 Ruling 2011-0413661R3 under s. 55(1) - "distribution".