In finding that an inter vivos trust that otherwise would have been grandfathered under s. 122(2) was not so grandfathered by virtue of carrying on an active business in the year, albeit by virtue only of being a limited partner of a Manitoba limited partnership, Stone JA stated:
[A]ll of the partners of a limited partnership carry on the business of the partnership. Whether a partnership be limited or general under the Manitoba statute, it must consist of “persons carrying on business in common, with a view of profit”. It is, therefore, the persons which compose the partnership that carry on the business rather than the limited partnership itself.
Stone JA then referred to Reed (Inspector of Taxes) v. Young, [1983] B.T.C. 430 (Eng. Ch.), where Nourse J. stated at page 446:
For present purposes, the essential features of a limited partnership are twofold. First, there must be one or more general partners who are liable for all the debts and obligations of the firm. Secondly, there must be or one more limited partners who at the time of entering into the partnership must contribute capital (which cannot be drawn out during the continuance of the partnership) and who are not liable for the debts and obligations of the firm beyond the amount so contributed.... There is another distinctive feature, which is that a limited partner cannot take part in the management of the partnership business and does not have power to bind the firm… These three features apart, there is no inordinate difference between a limited and an ordinary partnership. The result is that while the partnership is a going concern a limited partner adopts a pose as supine, and profits or loses as much or as little, as a sleeping partner in an ordinary partnership. The only difference between the two is that the sleeping partner may be rudely awoken to find that his liability for the debts and obligations of the firm is unlimited. [emphasis added by Stone JA]
Stone JA then continued:
That the appellant took no part in the management of the business does not, in my view, mean that it and the other limited partners did not carry on that business in conjunction with the general partners in that year.