The Partnership, whose 0.01% general partner (GPCo) is wholly-owned by its 99.99% limited partner (LPCo), transfers it business assets (the “Business Assets”) to newly-incorporated subsidiary (“Newco”) under s. 85(2) in consideration for Newco shares. Within 60 days, the Partnership is wound-up, so that the Newco Shares and nominal cash amounts will be distributed to GPCo and LPCo. Immediately following such “Winding-up,” GPCo will be liquidated into LPCo under s. 88(1). Within the three months thereafter, LPCo and Newco will amalgamate, thereby causing the amalgamated entity (h “Amalco”) to directly hold the “Business Assets” formerly held by Partnership.
Does the ownership of the Business Assets by Amalco within the three months following the Winding-up cause Amalco to be a person who was, immediately before the winding-up, a member of the partnership that carries on alone the business that was the business of the Partnership. If so, which takes precedence, s. 98(5) or 85(3)? CRA responded:
[S]ubsection 98(5) would not apply in the hypothetical scenario provided.
… Paragraph 87(2)(a) indicates that … Amalco will be a new corporation and will not be a member of the Partnership immediately before the Partnership has ceased to exist.