An LP governed by provincial law and with Canadian-resident members, invested as a limited partner in two LLLPs governed (“Florida-LLLP-1” and “Florida-LLLP-2”) governed by the Florida Revised Uniform Limited Partnership Act of 2005 (“FRULPA”), which provided:
- An LLLP is an entity distinct from its Partners that has a perpetual duration.
- General Partners have limitation of liability in respect of the obligations of the LLLP.
- Each General Partner is an agent of the LLLP for the purposes of the LLLP’s activities, and a Limited Partner does not have the right or the power to act for or bind the LLLP.
- Profits and losses of an LLLP shall generally be allocated among the Partners on the basis of the value of their Contributions.
- It may be continued into another jurisdiction, converted into another type of listed entity, or merged with other such entities.
The Agreement for the Florida-LLLP-1 (and similarly for Florida-LLLP-2) provided:
- the LLLP is a separate and distinct legal entity, all business of which should be conducted in its name;
- all property owned by the LLLP shall be owned by it as an entity and Partners shall generally have no ownership interest in any of the LLLP’s property, their interest in the LLLP being a personal property for all purposes; and
- the details of the Partners’ Capital Contributions, and the rules to maintain each Partner’s Capital Account and for the yearly allocation of Profits or Losses to Partners and for the distributions.
The Florida-LLLPs owned and operated Florida real estate, but then were liquidated and dissolved, with the surrender of their property being reported in accordance with the s. 79 rules. The LP reported capital losses on land, and terminal losses on Class 1 and Class 8 assets. Assessments disallowed terminal losses and capital losses on the basis that the Florida-LLLPs were corporations.
The Directorate indicated that, consistently with 2016-0642051C6, a Florida LLLP generally should be considered as a corporation given “the existence of a separate legal personality that is recognized under the FRULPA – meaning the full legal capacity to acquire and own property, to sue and be sued, to carry on their own activities and to incur liabilities of their own – and the limitation of liability afforded to all of their members.” However, in light of the transitional relief being afforded to such partnerships, the Directorate suggested “that consideration be given to allowing the Florida-LLLPs to be treated as partnerships for the purposes of the Act for the relevant taxation years.”