Principal Issues: Discussion of certain tax consequences under Reg. 5102(1), and sections 96, 143.2, 146 and 146.3 where an RRSP or RRIF trust purchases units of one of two classes of units of a small business investment limited partnership ("SBILP") with a combination of cash, full-recourse promissory notes and post-dated cheques.
1. Two classes of units, each class having different attributes will not satisfy the definition of a SBILP.
2. Title may not pass in law and may result in contravention of paragraph (i) of subsection 5102(1) of the Regulations.
3. If title does pass, the cash and full-recourse promissory notes would form part of the cost of the partnership units for purposes of the "at-risk" rule in section 96 of the Act. For the post-dated cheques, either 96(2.2)(c) will reduce the "at-risk" amount until the post-dated cheque is cashed or 143.2(7) will apply to deem the amount of the post-dated cheque to be a limited-recourse amount and subsection 143.2(6) will apply.
4. The use of the promissory notes receivable from the RRSP/RRIF by the SBILP as security for the acquisition of new investments is not relevant to the determination as to whether the SBILP satisfies the definition in subsection 5102(1)(h).
5. If the consideration for the partnership units paid by the RRSP/RRIF trust exceeds the FMV of the units, there is an income inclusion to the annuitant pursuant to 146(9)(b)/146.3(4)(b).
1. Contravenes the requirement that all units be identical under 5102(1)(d).
2. In this case the full-recourse promissory notes could constitute "deposits".
3. Post-dated cheques are either "amounts owing" to the SBILP under 96(2.2)(c) or "limited recourse amounts" which reduce the cost of the unit to the holder under 143.2(7) and 143.2(6).
4. The promissory notes receivable held the SBILP (payable by the RRSP/RRIF) constitute an asset of the SBILP and therefore could not possibly be "borrowed money" (a liability of the SBILP, a "promise to repay").
5. 146(9)(b)/146.3(4)(b) requirements.