CRA indicates that a post-wind up drop down transaction would preclude the application of s. 98(5)

Mr. A and Mr. B carried on business in a general partnership, whose most important asset (as to 85% of the total value) was goodwill. The partnership is wound up in reliance on s. 98(3) so that each receives a pro rata portion of the assets. Mr. A transfers his pro rata portion on a s. 85(1) rollover basis to a newly-incorporated wholly-owned corporation (A Inc.) and A Inc. then purchases the pro rata portion of the assets held by Mr. B.

CRA indicated that s. 98(5) would not apply assuming that the partnership ceased to exist before A Inc. acquired the former partnership property. Although the questioner adverted to the issue as to whether indeed undivided interests in goodwill can be transferred to the former partners of a partnership for a few moments in time, CRA nonetheless did not question the proposition that s. 98(3) could apply to such a winding up.

Neal Armstrong. Summaries of 8 October 2021 APFF Roundtable, Q.11 under s. 98(3) and s. 98(5).