Section 98 partnership disposition rollover

Partners meet this section when a partnership winds up and its property goes to the members or to one of them. For s. 98(3), all the partnership property must be distributed to persons who were members, each holding the same percentage in every property, and each must elect jointly in prescribed form within the time in s. 96(4). CRA form T2060 is the election.

What the rules set

• Each member’s proceeds for the partnership interest are deemed to be the greater of the interest’s adjusted cost base and money received plus the member’s percentage of the partnership’s cost amount of the property (s. 98(3)(a)).
• The partnership is deemed to dispose of each property for proceeds equal to its cost amount (s. 98(3)(f)).
• Section 98(5) applies where one, but not more than one, member carries on the business alone within 3 months and continues to use partnership property it received as proceeds of disposition of its interest.
• Subsection 98(3) does not apply in any case where s. 98(5) or s. 85(3) applies (s. 98(4)).

Not the corporate transfer

A partnership’s transfer of property to a corporation is a different case: CRA form T2058 is for a Canadian corporation and the members of a partnership to jointly elect under s. 85(2) on a disposition of property by the partnership to a taxable Canadian corporation. Read how to plan succession in a business partnership and compare the general partnership entry.