A wholly-owned subsidiary ("Lone Rock") of the taxpayer held a 99.9% limited partnership interest in a partnership between Lone Rock and a subsidiary of Lone Rock ("Newco"). Lone Rock assigned its limited partnership interest in the partnership to the taxpayer, the taxpayer on the same day caused Lone Rock to be wound up, and the following day Newco and the taxpayer signed a distribution agreement whereby the partnership assigned all its assets to the taxpayer.
The taxpayer was found not to have become a member of the partnership because the assignment of Lone Rock's limited partnership interest had not complied with provisions of the partnership agreement that required: the assignee of the interest to agree in writing to be bound by the terms of the agreement; the execution by the assignor to be guaranteed by a Canadian chartered bank; and all requisite filings as required by the Partnership Act (Alberta) to be made. There could be no finding of an implicit consent of the parties to these breaches because the partnership agreement also provided that no amendment thereto would be effective unless it had been approved by an extraordinary resolution.