Respecting a question on the taxation in Canada of carried interests, the Directorate stated:
"Carried interest" is a term often used to describe an arrangment in which a manager of a financial partnership, such as a hedge fund, private equity fund, or venture capital fund, receives an equity participation in the fund in eschange for his or her services. Determining whether a gain or loss from such activities will be taxed as either an income gain or loss or as a capital gain or loss is ultimately a question of fact that can be determined only on a case-by-case basis. Generally, the gains and losses of a taxpayer who is a trader or dealer or who carries on a business of trading in securities are taxed as an income gain or loss. The factors considered in making such a determination are discussed in Interpretation Bulletin IT-479R....