The five partners of a family partnership that generates and distributes passive income from stock market investments are Mr. and Mrs. X and their Children X, Y and Z ages 15, 22 and 23, respectively. The children have not contributed to or been involved in the management of the partnership, whereas Mr. and Mrs. X have been so involved in the sense of communicating four times per year with their stock broker. Is the partnership income subject to the tax on split income?
CRA indicated that such tax was inapplicable given that "split income" – para. (a) excluded dividends on listed shares or of mutual fund corporations, and para. (e) excluded taxable capital gains realized on such shares – and given that under s. 96(1)(f), partnership income retained its nature and character when allocated to the partners.