April 19, 2004
Qualified Limited Partnership Restrictions Eased
The qualified limited partnership rules found in the Income Tax Regulations would receive a significant update under the proposed amendments. There are several commercial and tax reasons that make limited partnerships attractive investment vehicles. For example, they provide limited liability and allow income and losses to be flowed out to investors. While investments in limited partnerships are generally considered foreign property, making such investments less attractive for pension funds, units of qualified limited partnerships are not treated as foreign property.
The proposed amendments continue an important legislative trend, by making the conditions for being a qualified limiteContent Ad partnership less restrictive. For example, exceeding the qualified limited partnership's 30% foreign property limit will no longer have the disastrous effect of deeming all the partnership's units to be permanently foreign property. Provided the limited partnership again complies with the foreign property limitations, its units will not be foreign property. In addition, if the partnership exceeds the foreign property limits, a portion of the units of a holder will still be considered not to be foreign property based on the proportion of non-foreign property held by the partnership to all property held by the partnership, determined by reference to cost amounts. The requirements relating to the general partner's share of the income or loss of the partnership are proposed to be amended to permit certain priority distributions to limited partners and certain catch-up distributions to the general partner. The requirement that the interests of the limited partners be identical has also been relaxed. Lastly, qualified limited partnerships would now be permitted to invest in other qualified limited partnerships as limited partners.
Return to Top
| 
•
