CRA finds that the use of personal holding companies can jeopardize the ability to assign a portion of the specified partnership business limit under s. 125(8)

The partners of a professional partnership are Messrs. B and D, who hold their partnership interests directly, and the personal Holdcos for Messrs. A and C. The shares of Serviceco (which provides its services exclusively to the partnership and deals at arm’s length with each partner) are held directly by the three individuals and Mr. D's Holdco.

CRA found that of the four partners, only B would be able to assign to Serviceco under s. 125(8) all or any portion of the business limit that had been allocated to him by the partnership. In the case of Mr. D, the problem was that although he was a partner of the partnership, he was not a shareholder of Serviceco. The Holdcos for A and C had essentially the same problem: they were partners of the partnership but not shareholders of Serviceco.

Neal Armstrong. Summary of 5 October 2018 APFF Roundtable, Q.5 under s. 125(8).