Marginal note:Residual interest in partnership
98.1 (1) Where, but for this subsection, at any time after 1971 a taxpayer has ceased to be a member of a partnership of which the taxpayer was a member immediately before that time, the following rules apply:
(a) until such time as all the taxpayer’s rights (other than a right to a share of the income or loss of the partnership under an agreement referred to in subsection 96(1.1)) to receive any property of or from the partnership in satisfaction of the taxpayer’s interest in the partnership immediately before the time at which the taxpayer ceased to be a member of the partnership are satisfied in full, that interest (in this section referred to as a “residual interest”) is, subject to sections 70, 110.6 and 128.1 but notwithstanding any other section of this Act, deemed not to have been disposed of by the taxpayer and to continue to be an interest in the partnership;
(b) where all of the taxpayer’s rights described in paragraph 98.1(1)(a) are satisfied in full before the end of the fiscal period of the partnership in which the taxpayer ceased to be a member thereof, the taxpayer shall, notwithstanding paragraph 98.1(1)(a), be deemed not to have disposed of the taxpayer’s residual interest until the end of that fiscal period;
(c) notwithstanding subsection 40(3), where at the end of a fiscal period of the partnership, in respect of a residual interest in the partnership,
(i) the total of all amounts required by subsection 53(2) to be deducted in computing the adjusted cost base to the taxpayer of the residual interest at that time
(ii) the total of the cost to the taxpayer of the residual interest determined for the purpose of computing the adjusted cost base to the taxpayer of that interest at that time and all amounts required by subsection 53(1) to be added to the cost to the taxpayer of the residual interest in computing the adjusted cost base to the taxpayer of that interest at that time
the amount of the excess shall be deemed to be a gain of the taxpayer, for the taxpayer’s taxation year that includes that time, from a disposition at that time of that residual interest; and
(d) where a taxpayer has a residual interest
(i) by reason of paragraph (b), the taxpayer shall, except for the purposes of subsections 110.1(4) and 118.1(8), be deemed not to be a member of the partnership, and
(ii) in any other case, the taxpayer shall, except for the purposes of subsection 85(3), be deemed not to be a member of the partnership.
Marginal note:Continuation of original partnership
(2) Where a partnership (in this subsection referred to as the “original partnership”) has or would but for subsection 98(1) have ceased to exist at a time when a taxpayer had rights described in paragraph 98.1(1)(a) in respect of that partnership and the members of another partnership agree to satisfy all or part of those rights, that other partnership shall, for the purposes of that paragraph, be deemed to be a continuation of the original partnership.
- NOTE: Application provisions are not included in the consolidated text;
- see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 98.1;
- 1994, c. 7, Sch. II, s. 74, c. 21, s. 45;
- 1995, c. 3, s. 27;
- 1998, c. 19, s. 125;
- 2006, c. 9, s. 63.
- Date modified: