IT-471R "Merger of Partnerships" under "Work in Progress"

The ACB of each partner's interest in a partnership immediately before a distribution of undivided interest pursuant to s. 98(3) will include the partner's proportion of the partnership liabilities assumed by the partners on the dissolution of the partnership.

Combined use of s. 98(3) wind-ups and s. 97(2) drop-downs to merge Cdn partnerships

1. The Act does not specifically provide for the merger or amalgamation of partnerships. However, two or more partnerships may effectively achieve a form of merger if each partnership distributes all of its property to its partners in accordance with subsection 98(3) and each partner subsequently contributes this property to the new partnership in accordance with subsection 97(2).

Asssumed liabilities increase ACB of partnership interest

3. ... The adjusted cost base of each partner's interest in the partnership as referred to in [98(3)(a)] will include pursuant to subparagraph 53(1)(e)(iv) the partner's proportion of the partnership liabilities assumed by the partners on the dissolution of the partnership. Under paragraph 98(3)(f), the partnership will be deemed to have disposed of the property for proceeds equal to the cost amount of the property to the partnership immediately before its distribution.