Conversion of a General Partnership Into a Limited Partnership
Would Revenue Canada confirm that the conversion of a general partnership to a limited partnership under Canadian jurisdiction would not result in a disposition (i.e. could be completed on a tax-free basis) where there is no change in the partners or their proportionate interests.
In general, the conversion of a general partnership to a limited partnership does not result in a disposition of the partnership interests of the general partners who become limited partners provided:
i) there has been no significant change in the rights and obligations of the partners other than potential liability; and
ii) the provincial law governing the partnership does not operate to cause a dissolution of the general partnership when there is a conversion to a limited partnership.
However, significant changes in any of the following areas upon conversion to a limited partnership may result in a disposition of the partnership interests:
i) the contributed capital accounts of any of the partners;
ii) the percentage interest in the partnership of any of the partners;
iii) the number or identity of the partners;
iv) the business of the partnership;
v) the percentage interest of each partner in the profits; or
vi) the percentage liability for losses of each partner, except for the limitation on liability of the limited partners:
CTFNovember, 1990R. AlbertSection 22