Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Q.18 Section 98(3)
It has been the Department's position, as stated at Canadian Tax Foundation Round Table sessions in 1984 and 1988, that subsection 98(3) would require each partner to receive an undivided interest in each property of the partnership and that a pro-rata distribution of such property is unacceptable. Does subsection 248(20) now provide the mechanism for pro-rata distributions in those situations?
Department's Position
In the situation described, subsection 248(20) would not provide a mechanism for pro-rata distributions of partnership property. Subsection 248(20) clarifies the tax consequences of the partition of property previously owned jointly by two or more persons. For certain tax purposes including the computation of income, it is the Department's view that a partnership and not its partners is the owner of property used in the partnership. Accordingly, the joint ownership test in subsection 248(20) would not be met on a distribution of partnership property. On the other hand, subsection 98(3) requires that each partner be distributed an undivided interest in each property of a Canadian partnership which has ceased to exist. Any partition of such property which becomes jointly owned by the former partners after the distribution will be subject to the application of subsection 248(20).
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