CRA rules that the assumption by a partner of a debt owing to it by a partnership bumped the partner’s ACB for s. 98(5) purposes

A partnership was wound-up under s. 98(5) as a result of the limited partner transferring its interest under s. 85(1) to the general partner. Immediately before this happened, the general partner assumed a debt that was owing to it by the partnership, with the result that the debt was extinguished by operation of law.

CRA ruled that the ACB of the general partner’s interest for s. 98(5) purposes was increased by the amount of such assumed debt, and that a forgiven amount did not arise on the extinguishing of the debt.

Neal Armstrong. Summary of 2016 Ruling 2016-0651621R3 under s. 98(5).