The taxpayer and other Canadian residents purchased all of the partnership interests of Americans in a Texas limited partnership ("Commons") through staggered assignments of partnership interest. When these assignments were completed, the principal property of the partnership (an apartment complex) was transferred to a second partnership consisting of the same U.S. limited partners and a new U.S. general partner.
After finding (at p. 5156) that "even in respect of foreign partnerships, for purposes of s. 96 of the Act, the essential elements of a partnership that exist under Canadian law must be present", the Court found that the taxpayers did not become members of a valid partnership. The Canadian taxpayers had not established the necessary intention to carry on business with a view to profit in respect of the apartment complex given that once they acquired their interest in the alleged partnership, the apartment complex was owned only briefly before it was disposed of according to a pre-closing agenda. Furthermore, the time, labour and money spent on the purchase and holding by the supposed partnership of an oil and gas property was nominal and, indeed, that arrangement might be viewed as co-ownership of property or as an isolated event or adventure as opposed to the carrying on of a business. The obtaining by the taxpayers of their supposed partnership interest by assignment did not improve their position because "in order for a person to enter and become a new partner of the valid and pre-existing partnership, that person and the existing members of the partnership must satisfy the essential elements of a valid partnership at the time of the entry of the new partner".
Accordingly, the taxpayer did not realize a loss under s. 96(1)(g) on the sale of the apartment complex.