Section 97(2) partnership rollover

Subject to subsections 97(3) and 13(21.2), section 97(2) of the Income Tax Act can apply where a taxpayer disposes of capital property, Canadian resource property, foreign resource property or inventory (other than certain eligible derivatives) to a partnership that, immediately afterwards, is a Canadian partnership of which the taxpayer is a member. The corporate counterpart is covered in this answer on section 85 rollovers.

How it works

The taxpayer and all the other members of the partnership must jointly elect in prescribed form within the time referred to in subsection 96(4). The CRA form is the T2059. Where the election is made, paragraphs 85(1)(a) to (f) apply to the disposition, with their references to the corporation read as references to the partnership or its other members. The section also adjusts the adjusted cost base of the taxpayer’s partnership interest. Subsection 97(3) removes the election in defined situations combining an acquisition of control, a winding-up or amalgamation, and a paragraph 88(1)(d) designation.

What to check or ask

• Is the partnership a Canadian partnership immediately after the transfer?
• Is the property of a kind the section covers?
• Have all the members agreed to sign the joint election, and by when?
• Could subsection 97(3) apply to this transfer?