CRA indicates that the s. 98(3) or (5) rollover provisions can apply to a distribution on the partnership winding-up of a life insurance policy

Where a partnership holding an exempt life insurance policy on the life of individual partners is wound up as described in s. 98(3) or 98(5), can the distribution of the policy on the partnership's winding-up occur on a rollover basis as may be permitted under those provisions, or are its proceeds of disposition determined under s. 148(7)? CRA responded:

[W]here a Canadian partnership that owns an interest in an exempt life insurance policy ceases to exist and all the requirements of subsection 98(3) or 98(5), as the case may be, are otherwise met, it is our general view that those provisions would take precedence over subsection 148(7) such that there would be a tax-deferred rollover of the exempt life insurance policy.

Neal Armstrong. Summary of 29 September 2022 External T.I. 2021-0882411E5 under s. 148(7).