See Also
Vinet v. Sous-ministre du Revenu du Québec, 2017 QCCQ 3957, aff'd 2019 QCCQ 574
An individual, who was the sole limited partner of a Quebec limited partnership (“SEC”) that owned and operated multiple farms, and the president of its general partner, argued that he was not a limited partner under the Quebec equivalent of ITA s. 96(2.4)(a), so that he could deduct his share of a substantial loss of the LP. He relied in this regard on s. 2244 of the Civil Code, which provided that a limited partner “may not negotiate any business on behalf of the partnership or act as mandatary or agent for the partnership,” and pointed to his involvement in the business of the LP including negotiating with suppliers and making various purchases.
Breault JCQ found that the individual had failed to establish that such activities were not effected as agent or manager for the general partner. He also quoted with approval an author who opined that “it is only in the common law provinces that the control of the internal management of a limited partnership gives rise to liability of the limited partners.”
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 96 - Subsection 96(2.4) - Paragraph 96(2.4)(a) | managerial actions of an individual limited partner were qua officer of the GP, so that he was a limited partner for tax purposes | 356 |
Major v. Brodie & Anor, [1998] BTC 141 (Ch. D)
The taxpayers used borrowed money to make a contribution of capital to a partnership (Skeldon Estates) which was a member of a second partnership (Murdoch) which carried on a farming business utilizing farms owned by Skeldon Estate and the second partner of Murdoch.
The Inspector of Taxes failed in a submission that the taxpayers were not eligible for an interest deduction under s. 362(1) of the Income Incorporations Taxes Act 1988 on the ground that the borrowed money contributed to Skeldon Estate was not "used wholly for the purposes of the trade ... carried on by the partnership [i.e., Skeldon Estate]" but, rather, was used for the purposes of the trade carried on by Murdoch. Park J. held (at p. 152) that as "a trade carried on by a partnership is a trade carried on by its members and by each of them" and the borrowed money was "used wholly for the purposes of the trade carried on by W. Murdoch & Son", it followed "that the money [was] thereby used wholly for the purposes of the trade carried on by the partners in W. Murdoch & Son." He went on to indicate (at p. 153) that under English law, where A and B are the partners in partnership X, and X and another person (C) form another partnership, partnership Y, A and B are considered to be partners in partnership Y in their capacity as members of partnership X.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - 101-110 - Section 102 - Subsection 102(2) | top tier partners are lower tier partnership members | 242 |
| Tax Topics - Income Tax Act - Section 96 - Subsection 96(1) - Paragraph 96(1)(f) | 242 | |
| Tax Topics - Statutory Interpretation - Provincial Law | 97 |
Administrative Policy
2018 Ruling 2017-0723421R3 - Creation of a new Mutual Fund Trust
The Trust, which will be settled by an officer of its Manager, will invest principally in the limited partner units (Class A units) of a limited partnership (LP). A majority of the directors of the general partner (GP) will not be trustees of Trust. GP will be wholly-owned by the Manager, who also will be the sole trustee of the Trust.
Ruling that s. 253.1 will apply such that the acquisition of the limited partnership interest in the LP by the Trust will not, in and of itself, cause the Trust to be considered to be carrying on the business of the limited partnership for the purposes of s. 132(6)(b).
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - 101-110 - Section 108 - Subsection 108(2) - Paragraph 108(2)(a) | non-listed MFT can redeem with notes issued by vacuous sub trust, or suspend redemptions for 1 year | 528 |
2013 Ruling 2013-0487911R3 - Mortgage Investment Corporation
Background
Opco, which qualifies as a MIC under s. 130.1(6), acquired real property (the Property) on foreclosing on a mortgage. Parent1 together with his children is a significant shareholder. Parent1 is the sole director of the manager of Opco.
Transactions
Opco will transfer the Property to LP in consideration for units of LP, with LP then managing and developing the Property. The sole shareholder, director and office of the general partner (GP Co) of LP will be a relative of Parent1, and GP Co's articles prohibit Opco from owning its shares. The Partnership Agreement will prohibit LP from acquiring any (foreign) property listed in s. 130.1(6)(c).
GP Co will be solely responsible for the management and control of the LP and will conduct the affairs of LP in such a manner that the liability of the limited partner will be limited. … Opco may advance funds to the LP from time to time for working capital and development… on arm's length commercial terms… .
Ruling
S. 253.1 will apply such that the acquisition of the LP units by Opco will not cause Opco to be carrying on LP's business for purposes of s. 130.1(6)(b).
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 130.1 - Subsection 130.1(6) | carrying on non-qualifying activities through subsidiary LP; GP held by relative of patriarch | 208 |
17 March 2003 External T.I. 2001-0095675 - Unit Trust investing in a limited partnership
As a result of the introduction of s. 253.1, the mere ownership of an interest in a limited partnership will not jeopardize the qualification of a trust as a unit trust even if the nature of the business carried on by the partnership would not satisfy s. 108(2)(b)(ii).
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - 101-110 - Section 108 - Subsection 108(2) - Paragraph 108(2)(b) | partnership look-through for s. 108(2)(b)(iii) to (v) purposes | 271 |
| Tax Topics - Income Tax Act - Section 96 | Ontario partnership debt owing to limited partner respected | 309 |
2001 Ruling 2001-0070943 - PARTNERSHIP INTEREST PENSION CORP.
Based on revised explanatory notes issued on June 16, 2000, the Agency ruled that the acquisition of limited partnership units in a limited partnership that only owned real property which it leased to a third party would not result in the corporation ceasing to satisfy s. 149(1)(o.2)(ii).
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 69 - Subsection 69(1) - Paragraph 69(1)(b) | exercise price respected as the proceeds of property subject to NAL option | 57 |
| Tax Topics - Income Tax Act - Section 97 - Subsection 97(2) | question of fact whether post-drop-down loan is boot | 81 |
Subsection 253.1(2)
Administrative Policy
Guidance on the income tax measures to support journalism CRA Webpage 23 December 2019
Related business exception must be complied with if not within s. 253,1(2)
5.14. An RJO can hold an interest in a partnership and it will not be considered to be carrying on a business activity if it meets all of the following conditions:
- the RJO’s liability as a member of a partnership is limited under any law governing the arrangement in respect of the partnership;
- the RJO and all non-arm’s length entities collectively hold 20% or less of the interests in the limited partnership; and
- the RJO deals at arm’s length with each general partner of the limited partnership.
5.15. An RJO that acquires and holds a partnership interest beyond these limits would be considered to be carrying on the business of the partnership. In this circumstance, the business would need to be related to the RJO’s purposes in order to meet the registration requirements under the Act.