In order to accomplish a sale of two oil and gas properties that were held by a partnership of which the taxpayer was a substantial partner, it was agreed that the purchaser ("Phillip") would become a 5.27% partner of the partnership and, some days later, receive a distribution to it of the two properties in substantial satisfaction of its partnership interest and, pursuant to a clause in the partnership agreement that was amended with this transaction in mind, be allocated 100% of the proceeds of disposition arising under subsection 98(2) to the partnership as a result of the resulting disposition of the two properties (as well as its 5.27% share of the partnership income for the 25 days that it was a member of the partnership).
After "tentatively" indicating his view that partnership income for purposes of section 103 meant income computed using the rules of the Act, so that such income included notional items of income such as deemed proceeds of disposition arising under subsection 98(2), Bowman C.J. went on to find that the allocation of 100% of the proceeds of disposition to Phillips was unreasonable given that the gain on the transferred properties was not attributable to Phillips having rolled assets into the partnership, it was only entitled to 5.27% of the other income of the partnership and it merely joined the partnership (for 25 days) in order to extract the two properties.