Bow River Pipe Lines Ltd. v. Canada
A-472-96
Desjardins J.A.
16/7/97
35 pp.
Appeal from Tax Court of Canada decision dismissing appeal for 1987 to 1991 taxation years on basis appellant had not acquired, prior to December 4, 1985, certain resource properties as result of being member of partnership, as required by Income Tax Act, s. 98(5)(d)-Case dealing with purpose, effect of transitional provisions as applied to partnerships in Income Tax Act-Appellant, Lone Rock Resources Ltd. incorporated under laws of Alberta, each engaged in business of exploring for, developing, producing crude oil, natural gas, related hydrocarbons in Western Canada-Agent for appellant proposing to purchase from shareholders of Lone Rock all issued, outstanding shares of Lone Rock-Offer accepted by shareholders of Lone Rock-Latter became sole shareholder of Numbered Company prior to December 4, 1985-On January 14, 1986, Numbered Company, Lone Rock entered into limited partnership agreement under LLR Limited Partnership Agreement-Distribution Agreement signed between appellant, Lone Rock by which latter "assigns, transfers, conveys unto transferee (appellant) right, title, interest of transferor (Lone Rock) in and to all its property, assets, business"-Under s. 26(5) of transitional provisions, Income Tax Act, s. 98(5)(d) still effective with respect to property received by member of partnership where property acquired by partnership after December 4, 1985 pursuant to agreement in writing entered into before that date, and property received by member of partnership in satisfaction of interest in partnership acquired after December 4, 1985 pursuant to agreement in writing entered into before that date-First ground of appeal whether appellant became member of partnership-Partnership Act (Alberta) not placing assignee in position to carry on business of partnership, essential element for whoever wishes to claim "bump up" given under Income Tax Act, s. 98(5)-S. 98(5) applies only in situations where one member of partnership continues to carry on business of extinguished partnership as sole proprietorship-Appellant never achieved status of member of partnership-Second ground of appeal whether partnership acquired property after December 4, 1985 pursuant to agreement in writing entered into before that date, and in satisfaction of interest in partnership pursuant to agreement in writing entered into before December 4, 1985-Words "agreement in writing" not requiring agreement create "contractual rights and obligations"-Not limited to purchase/sale agreement-Partnership acquired property after December 4, 1985 pursuant to agreement in writing-No agreement in writing between appellant, Lone Rock, as limited partner in partnership, which irrevocably and irreversibly obligated appellant to acquire Lone Rock's interest in partnership before December 4, 1985-Appellant could not avail itself of transitional provisions of Income Tax Act-Entitled to add cost, if any, of resource property to Canadian Oil and Gas Property Expense-Matter remitted back to Tax Court of Canada for determination of cost, if any, to appellant of Canadian resource property it received on termination of Lone Rock Resources Limited Partnership-Appeal allowed in part-Income Tax Act, S.C. 1970-71-72, c. 63, s. 98(5)(d) (as repealed by S.C. 1986, c. 55, s. 26(4))-An Act to amend the Income Tax Act and a related Act, S.C. 1986, c. 55, s. 26(5)-Partnership Act, R.S.A. 1980, c. P-2.