Income Tax Act — I-3.3 40
ceeding the lesser of (a) the amount, if any, by which (i) the total of all amounts each of which was an amount deemed by subsection 40(3.1) to be a gain of the taxpayer from a disposition of the interest before that time exceeds (ii) the total of all amounts each of which was an amount deemed by this subsection to be a loss of the taxpayer from a disposition of the interest before that time, and (b) the adjusted cost base to the taxpayer of the interest at that time. Artificial transactions (3.13) For the purpose of applying section 53 at any time to a member of a partnership who would be a member described in subsection (3.1) of the partnership if the fiscal period of the partnership that includes that time ended at that time, where at any time after February 21, 1994 the member of the partnership makes a contribution of capital to the partnership and (a) the partnership or a person or partnership with whom the partnership does not deal at arm’s length (i) makes a loan to the member or to a person with whom the member does not deal at arm’s length, or (ii) pays an amount as, on account of, in lieu of payment of or in satisfaction of, a distribution of the member’s share of the partnership profits or partnership capital, or (b) the member or a person with whom the member does not deal at arm’s length becomes indebted to the partnership or a person or partnership with whom the partnership does not deal at arm’s length, and it is established, by subsequent events or otherwise, that the loan, payment or indebtedness, as the case may be, was made or arose as part of a series of contributions and such loans, payments or other transactions, the contribution of capital shall be deemed not to have been made. Specified member of a partnership (3.131) Where it can reasonably be considered that one of the main reasons that a member of a partnership was not a specified member of the partnership at all times since becoming a member of the partnership is to avoid the application of subsection 40(3.1) to the member’s interest in the partnership, the member is deemed for the purpose of that subsection to have been a specified member of the partnership at all times since becoming a member of the partnership. Limited partner (3.14) For the purpose of subsection 40(3.1), a member of a partnership at a particular time is a limited partner of the partnership at that time if, at that time or within 3 years after that time, (a) by operation of any law governing the partnership arrangement, the liability of the member as a member of the partnership is limited (except by operation of a provision of a statute of Canada or a province that limits the member’s liability only for debts, obligations and liabilities of the partnership, or any member of the partnership, arising from negligent acts or omissions, from misconduct or from fault of another member of the partnership or an employee, an agent or a representative of the partnership in the course of the partnership business while the partnership is a limited liability partnership); (b) the member or a person not dealing at arm’s length with the member is entitled, either immediately or in the future and either absolutely or contingently, to receive an amount or to obtain a benefit that would be described in paragraph 96(2.2)(d) if that paragraph were read without reference to subparagraphs 40(3.14)(b)(ii) and 40(3.14)(b)(vi); (c) one of the reasons for the existence of the member who owns the interest (i) can reasonably be considered to be to limit the liability of any person with respect to that interest, and (ii) cannot reasonably be considered to be to permit any person who has an interest in the member to carry on the person’s business (other than an investment business) in the most effective manner; or (d) there is an agreement or other arrangement for the disposition of an interest in the partnership and one of the main reasons for the agreement or arrangement can reasonably be considered to be