2078970 Ontario – Federal Court of Appeal indicates that an s. 152(1.4) determination’s validity awaits a factual Tax Court determination of the partnership’s existence

CRA determined that two limited partnerships did not exist because their partners were not carrying on business in common with a view to profit, and issued notices of determination to the partnerships under s. 152(1.4) determining that losses reported by the purported partnerships for the three years commencing in 2006 were, for this reason, nil. The following question was posed under Rule 58:

Where the Minister has at all times concluded that no partnership existed, can the Minister issue a valid Notice of Determination in respect of that purported partnership under subsection 152(1.4) … .

Webb JA essentially indicated that the real question was whether the partnership in fact existed, which was a factual determination to be made by the Tax Court, so that the question posed was premature. If, in fact, the partnerships did not exist, then no valid determinations could have been made under s. 152(1.4), so that the answer to the question clearly could not be an unqualified “yes.” Furthermore, since the Tax Court Judge had instead determined that the answer was no, it would follow that the s. 152(1.4) determinations that had been made were not valid determinations - without any finding being made as to the validity of the partnerships, so that this validity issue would be required to be addressed following CRA assessments of the multitude of partners, if it were not statute-barred from doing so. Accordingly, Webb JA concluded that the question posed was “premature,” and that the key question of the validity of the partnerships should be pursued before the Tax Court by getting on with the appeals.

Neal Armstrong. Summaries of Canada v. 2078970 Ontario Inc.,, as designated partner of Lux Operating Limited Partnership, 2020 FCA 162 under s. 152(1.4) and s. 152(1.8).