In the situation where all the property of the predecessor partnership other than property necessary to "pay out" a retiring partner is transferred to a new partnership, CRA first noted that "[o]rdinarily, the partnership agreement will provide for the continuation of the partnership ... [so that] subsection 98(6) does not apply because the partnership would not have ceased to exist." CRA then stated:
When a partnership ceases to exist, partnership law provides for the application of partnership property vis-à-vis the partnership's creditors and for each partner as against the other partners. If subsection 98(6) applies, the fiction for tax purposes is the partnership continues to exist. Therefore, the words in subsection 98(6) regarding the transfer of all of the predecessor partnership's property can only be satisfied if the fictional transfer happened at the same time as the cessation. If the outgoing partner was provided with his share of the partnership property before the partnership ceases to exist, as contemplated by the words "at or before that time" in subsection 98(6), administratively, Canada Revenue Agency would consider the words "all of the property", satisfied if all of the property of the old partnership was directly transferred by the predecessor partnership to the new partnership immediately after the settlement of the outgoing partner's interest.