CRA considers that settlement of a withdrawing partner’s interest with partnership property will not scupper the s. 98(6) rollover

The rollover under s. 98(6) for the replacement of a Canadian partnership by another partnership with the same or fewer partners requires that all of the property of the predecessor partnership be transferred to the new partnership.  CRA considers that this requirement will be satisfied even though partnership property was paid out to a withdrawing partner whose departure caused the new partnership to arise at law – provided that all of the property of the old partnership was transferred directly by it to the new partnership immediately after the settlement of the withdrawing partner's interest.

Neal Armstrong.  Summary of 30 June 2014 T.I. 2014-0522181E5 F under s. 98(6).