Stursberg v. Canada
A-1013-91
Hugessen J.A.
17/6/93
10 pp.
Appeal from trial judgment dismissing appeal from Tax Court, in turn dismissing appeal from assessment -- General partnership agreement providing mechanism whereby partner could reduce partnership interest providing found someone else willing to acquire interest -- On February 7, 1983 appellant reducing interest from 40% to 15% and another partner increasing its interest from 10% to 35% when paid $162,500 to partnership and partnership paid $162,500 to appellant -- Partnership not having any profits -- Income Tax Act, s. 40(3) creating deemed capital gain for taxpayer whenever adjusted cost base falling below zero -- Amounts covered by s. 53(2)(c) excluded from calculation of adjusted cost base -- S. 53(2)(c)(v) providing for deduction of amount received by taxpayer on account of distribution of share of partnership capital in computing adjusted cost base to taxpayer -- Tax Court and Trial Judge holding transaction not covered by s. 53(2)(c) as nature of capital structure of partnership unchanged by transaction -- Whether payment received by appellant distribution of partnership capital or disposition of part of partnership interest giving rise to capital gain -- Appeal dismissed -- Distribution of capital, whether proportionate sharing out among many, or single or periodic payment to one recipient, resulting in change in residue of what has been distributed, either by reducing it or by otherwise altering its structure -- Implies division or redivision of distributed capital -- Distribution of capital always resulting in alteration of corpus from which made, whether capital structure of partnership, estate, trust -- Application of s. 53(2)(c)(v) only triggered by payment to appellant of share of partnership capital -- On February 7, 1983 appellant's share of partnership capital $162,500 -- "Distribution" if partnership capital reduced by that amount -- No distribution herein because no change in corpus of partnership capital or in relative interests of any of other partners -- Since not distribution of part of share of appellant in partnership capital, necessarily disposition of part of such share within s. 54(c) and appropriately assessed as such -- Income Tax Act, S.C. 1970-71-72, c. 63, ss. 40(3), 53(2)(c)(v) (as am. by S.C. 1974-75-76, c. 26, s. 24), 54(c), 100(2) (as am. idem, s. 64).