Revenue Canada Taxation Head Office
G. Kauppinen (613)957-3495
March 10, 1988
Dear Sirs:
This is in reply to your letter dated December 7, 1987 regarding qualified limited partnerships ("QLPs") as defined at subsection 5000(7) of the Income Tax Regulations ("Regulations").
You have outlined the following hypothetical situation.
There are several potential founders of a QLP who wish to act as general partner and managers of the fund. They would prefer to recognize the income and losses resulting therefrom personally, rather than as shareholders of a single incorporated general partner.
To do so, they propose to form a limited partnership ("LP") that would act as general partner for the QLP.
You have asked our opinion as to whether the foregoing structure would comply with paragraph 5000(7)(a) of the Regulations under the definition of a QLP, that is, the requirement that a QLP have only one general partner.
In our view, this structure would not satisfy the provisions of paragraph 5000(7)(a) of the Regulations. It is our understanding that under various Partnerships Acts of the common law provinces (e.g. the Limited Partnerships Act, R.S.O. 1970, c.247) a limited partnership may consist of one or more general partners and one or more limited partners. However, the general partners only shall be authorized to transact business, sign for the partnership, and to bind it.
In your situation, the LP could act as general partner for the QLP. However, since the LP itself would have more than one general partner, it is our opinion that the QLP would also have more than one general partner.
We trust the foregoing is of assistance.
Yours truly,
for Director Financial Industries Division Rulings Directorate