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D. Watson (613)957-8960
September 29, 1987
Dear Sir:
This letter is further to your telephone conversation of August 10, 1987 with Mr. Doug Watson of this Directorate concerning the tax consequences that arise in a situation where a taxpayer is a trader in limited partnership units.
The provisions of the Income Tax Act ("Act") applicable to partnerships are generally predicated on a taxpayer holding his partnership units as capital property. This is consistent with the concept of a partnership being an arrangement that subsists between two or more persons for the purpose of carrying on a business for profit.
There would appear to be a number of tax implications, some of which you alluded to, in situations where a taxpayer acquires partnership units with the intention to resell them. Thus far we have not been confronted with such a situation but as a result of your enquiry we will be taking this matter under study. Until this study has been completed, it would be inappropriate for us to make any comment.
We would note, however, that this Department is responsible for administering the Act and accordingly, to the extent that any deficiencies exist, amendments to the legislation would be required. It is not open to us to allow taxpayers to use a reasonable approach, as you suggested, to offset or take advantage of any such deficiencies that might be present in the Act.
We regret that we are unable to be of more assistance at this time.
Yours truly,
for Director Financial Industries Division Rulings Directorate Legislative and Intergovernmental Affairs Branch