Income Tax Act — I-3.3 100
Disposition of interest in partnership 100 (1) If, as part of a transaction or event or series of transactions or events, a taxpayer disposes of an interest in a partnership and an interest in the partnership is acquired by a person or partnership described in any of paragraphs (1.1)(a) to (d), then notwithstanding paragraph 38(a), the taxpayer’s taxable capital gain for a taxation year from the disposition of the interest is deemed to be the total of (a) 1/2 of such portion of the taxpayer’s capital gain for the year from the disposition as may reasonably be regarded as attributable to increases in the value of any partnership property of the partnership that is capital property (other than depreciable property) held directly by the partnership or held indirectly by the partnership through one or more other partnerships, and (b) the whole of the remaining portion of that capital gain. Acquisition by certain persons or partnerships (1.1) Subject to subsection (1.2), subsection (1) applies in respect of a disposition of a partnership interest by a taxpayer if the interest is acquired by (a) a person exempt from tax under section 149; (b) a non-resident person; (c) another partnership to the extent that the interest can reasonably be considered to be held, at the time of its acquisition by the other partnership, indirectly through one or more partnerships, by a person that is (i) exempt from tax under section 149, (ii) a non-resident, or (iii) a trust resident in Canada (other than a mutual fund trust) if (A) an interest as a beneficiary (in this subsection and subsection (1.2) having the meaning assigned by subsection 108(1)) under the trust is held, directly or indirectly through one or more other partnerships, by a person that is exempt from tax under section 149 or that is a trust (other than a mutual fund trust), and (B) the total fair market value of the interests as beneficiaries under the trust held by persons referred to in clause (A) exceeds 10% of the fair market value of all the interests as beneficiaries under the trust; or (d) a trust resident in Canada (other than a mutual fund trust) to the extent that the trust can reasonably be considered to have a beneficiary that is (i) exempt from tax under section 149, (ii) a partnership, if (A) an interest in the partnership is held, whether directly or indirectly through one or more other partnerships, by one or more persons that are exempt from tax under section 149 or are trusts (other than mutual fund trusts), and (B) the total fair market value of the interests held by persons referred to in clause (A) exceeds 10% of the fair market value of all the interests in the partnership, or (iii) another trust (other than a mutual fund trust), if (A) one or more beneficiaries under the other trust are a person exempt from tax under section 149, a partnership or a trust (other than a mutual fund trust), and (B) the total fair market value of the interests as beneficiaries under the other trust held by the beneficiaries referred to in clause (A) exceeds 10% of the fair market value of all the interests as beneficiaries under the other trust. De minimis (1.2) Subsection (1) does not apply to a taxpayer’s disposition of a partnership interest to a partnership or trust described in paragraph (1.1)(c) or (d) — other than a trust under which the amount of the income or capital to be distributed at any time in respect of any interest as a beneficiary under the trust depends on the exercise by any person or partnership of, or the failure by any person or partnership to exercise, any discretionary power — if the extent to which subsection (1) would, but for this subsection, apply to the taxpayer’s disposition of the interest because of subsection (1.1) does not exceed 10% of the taxpayer’s interest. Exception — non-resident person (1.3) Subsection (1) does not apply in respect of a disposition of an interest in a partnership by a taxpayer to a person referred to in paragraph (1.1)(b) if