A partnership has several members, some of whom hold partnership interests which participate in both income and capital of the partnership. The partnership agreement will be amended to provide for the issuance of two partnership interests: the first, to provide for participation only in income; and the second, to provide for participation only in capital. If only the income share is subsequently disposed of, would s. 96(1.01) apply?
After noting “that the totality of the interests of a partner held in a partnership constitute a single property of the partner and represent its interest in the partnership for purposes of the Act,” CRA stated that s. 96(1.01) would not apply “since a member of the partnership would dispose only of its share of income and would not cease to be a member of the partnership.”