CRA confirms that s. 66.3(3) does not apply to the cost of shares received on a ss. 85(2) and (3) wind-up of a flow-through share partnership

S. 66.3(3) deems the cost of flow-through shares to be nil. CRA confirmed that where a flow-through LP transfers its flow-through shares under s. 85(2) to a mutual fund corporation for shares of the MFC, and then distributes those shares to its partners on its winding-up under s. 85(3), s. 66.3(3) would not apply to determine the cost to the limited partners of the distributed shares. That cost instead would be determined under s. 85(3)(f) to be equal to the ACB of their interests in the LP immediately before the LP winding-up, and would not necessarily be nil.

Neal Armstrong. Summary of 17 September 2018 External T.I. 2018-0751571E5 F under s. 66.3(3).