Is a foreign exchange gain or loss recognized where a Canadian partnership is dissolved in accordance with s. 98(3) and, as part of the dissolution, each former partner assumes a pro rata share of the foreign debt obligations (owed on capital account) of the partnership? CRA responded:
Generally ... subsection 39(2) ... applies only where an actual transaction has taken place. It is our view that foreign exchange gains or losses can generally be recognized in the circumstances described above, i.e., where foreign debt obligations are assumed by former partners as part of a rollover under subsection 98(3) ... .