CRA acknowledges that partnerships are transparent for s. 116 purposes

CRA has found that where a partnership disposes of shares of a Canadian real estate company, none of the non-resident partners is taxable under the taxable Canadian property rules (and no s. 116 certificate is required).  The reason is that s. 96(1), which effectively deems the shareholding to be taxable Canadian property to the partnership, does not apply for the purposes of the potential application of s. 2(3)(c) to its partners.  Furthermore, given that CRA acknowledges that no partner (including a 99% partner) owns the partnership property, this result does not appear to rest on the size of the partnership interest of the non-resident.

CRA considers this result to be "unintended" and has advised Finance.

Neal Armstrong.  Summary of 19 March 2013 Memorandum 2010-0385931I7 under s. 116(1).