IT-457R "Election by Professionals to Exclude Work in Progress from Income" under "Meaning of 'Work in Progress'"

S. 98(3) rollout followed by s. 97(2) roll-in

19. The Act does not contain any special provisions governing the merger of partnerships. However, in the case of a Canadian partnership the effect of a merger can be accomplished by utilizing the "roll-out, roll-in" provisions of subsections 98(3) and 97(2). Where Canadian partnerships using these provisions have previously elected under section 34 not to include work in progress in computing income, each former Canadian partnership may "roll-out" its work in progress at a "cost amount" of nil (see 18 above. Furthermore, each partner of the former Canadian partnerships may "roll-in" work in progress into the new (merged) Canadian partnership at an agreed amount of nil. The new Canadian partnership may elect under paragraph 34(a) not to include in income the work in progress at the end of its first or a subsequent taxation year.

Unless s. 85(3), 98(3) or 98(5) applies, a transfer of property (including work in progress of a professional practice subject to an election under s. 34) from a partnership to a partner or all partners is deemed to have been made at fair market value. RC will not object if additional income arising to the partnership from such a transfer is allocated to the withdrawing partner.