CRA rules that a partner’s election to have its LP units redesignated as units of a different class will not entail their disposition

A limited partnership, which invests in securities chosen by its manager of a discretionary basis, is continuously offering two classes of its LP units to investors: Class A units (which bear a management fee) to taxable investors; and Class T units (which do not bear a management fee) to RRSPs. It will add two new classes of units, with the same terms as the Class As except for bearing a different management fee and there being a longer notice period for retracting units (in order to permit a longer-term focus in the underlying investing). It will also provide current partners with the option to re-designate their current units as new units.

CRA ruled that the creation of the new units would not, by itself, result in a disposition of any existing units and that the redesignation would not by itself result in a disposition of such units. Compare 2011-0429611R3, where CRA gave a preliminary view that redesignating one class of REIT preferred units to a second would entail their disposition.

Neal Armstrong. Summary of 2017 Ruling 2017-0687061R3 under s. 248(1) – disposition.