In order to produce an exact 1/3 division of the rental properties to be divided on a butterfly split-up between three equal shareholders (each of which formed a transferee corporation (TC)), some properties might be held by the TCs in co-ownership. CRA received the following statement that apparently went towards establishing that indeed such properties would be held in co-ownership rather than partnership:
(a) the parties to the co-ownership agreement (individually a co-owner and collectively the co-owners) do not intend to create a partnership;
(b) no co-owner can act on behalf of another co-owner without obtaining prior consent from that co-owner;
(c) each co-owner will have a well-defined separation of interests in, and ownership of, the property subject to the co-ownership;
(d) no co-owner can charge and/or grant security over the co-owned property as a whole as each co-owner will only have the right to deal with its own undivided interest in the property;
(e) each co-owner’s profit and loss from the co-owned property will be calculated by each co-owner individually, and the agreement will not provide a mechanism for the allocation of profit or loss from the co-owned property; and
(f) each co-owner’s liability will be limited to their own expenses.