Income Tax Act — I-3.3 98
Disposition of partnership property 98 (1) For the purposes of this Act, where, but for this subsection, at any time after 1971 a partnership would be regarded as having ceased to exist, the following rules apply: (a) until such time as all the partnership property and any property substituted therefor has been distributed to the persons entitled by law to receive it, the partnership shall be deemed not to have ceased to exist, and each person who was a partner shall be deemed not to have ceased to be a partner, (b) the right of each such person to share in that property shall be deemed to be an interest in the partnership, and (c) notwithstanding subsection 40(3), where at the end of a fiscal period of the partnership, in respect of an interest in the partnership, (i) the total of all amounts required by subsection 53(2) to be deducted in computing the adjusted cost base to the taxpayer of the interest at that time exceeds (ii) the total of the cost to the taxpayer of the interest determined for the purpose of computing the adjusted cost base to the taxpayer of that interest at that time and all amounts required by subsection 53(1) to be added to the cost to the taxpayer of the interest in computing the adjusted cost base to the taxpayer of that interest at that time, the amount of the excess shall be deemed to be a gain of the taxpayer for the taxpayer’s taxation year that includes that time from a disposition at that time of that interest. Deemed proceeds (2) Subject to subsections 98(3) and 98(5) and 85(3), where at any time after 1971 a partnership has disposed of property to a taxpayer who was, immediately before that time, a member of the partnership, the partnership shall be deemed to have disposed of the property for proceeds equal to its fair market value at that time and the taxpayer shall be deemed to have acquired the property at an amount equal to that fair market value. Rules applicable if partnership ceases to exist (3) If at any particular time after 1971 a Canadian partnership has ceased to exist and all the partnership property has been distributed to persons who were members of the partnership immediately before that time so that immediately after that time each such person has, in each such property, an undivided interest, or for civil law an undivided right (which undivided interest or undivided right is referred to in this subsection as an “undivided interest or right”, as the case may be) that, when expressed as a percentage (referred to in this subsection as that person’s “percentage”) of all undivided interests or rights in the property, is equal to the person’s undivided interest or right, when so expressed, in each other such property, if each such person has jointly so elected in respect of the property in prescribed form and within the time referred to in subsection 96(4), the following rules apply: (a) each such person’s proceeds of the disposition of the person’s interest in the partnership shall be deemed to be an amount equal to the greater of (i) the adjusted cost base to the person, immediately before the particular time, of the person’s interest in the partnership, and (ii) the amount of any money received by the person on the cessation of the partnership’s existence, plus the person’s percentage of the total of amounts each of which is the cost amount to the partnership of each such property immediately before its distribution; (b) the cost to each such person of that person’s undivided interest or right in each such property is deemed to be an amount equal to the total of (i) that person’s percentage of the cost amount to the partnership of the property immediately before its distribution, and (i.1) [Repealed, 2016, c. 12, s. 34] (ii) where the amount determined under subparagraph (a)(i) exceeds the amount determined under subparagraph (a)(ii), the amount determined under paragraph (c) in respect of the person’s undivided interest or right in the property; (c) the amount determined under