After preliminary transactions, ParentCo and its historic subsidiary, SubCo were to be the only partners of a general partnership (Partnership C); and Partnership C, ParentCo and SubCo’s newly-incorporated subsidiary, NewCo2 were to be the only partners of a second general partnership (Partnership D).
SubCo was then to be wound-up into ParentCo pursuant to s. 88(1) (so that Partnership C would be dissolved by operation of law on a s. 98(5) rollover basis) and then, at least one week later, NewCo2 was to be similarly wound-up into ParentoCo (so that Partnership D also would be dissolved by operation of law on a s. 98(5) rollover basis).
One of the preliminary transactions on which CRA did not rule was the sale by Partnerships C and D of Canadian resource properties (CRP) to ParentCo for cash consideration so as to reduce the balances in their successor CCEE and CCOGPE, thereby minimizing the risk of s. 66.7(16) applying as a consequence of CRP transfers to ParentCo on their windings-up. ParentCo expected to earn income from the CRP transferred to it by Partnerships C and Partnership D, that is at least equal to the amount of the successor CCDE and successor CCOGPE related to that CRP that may have otherwise been stranded pursuant to s. 66.7(16) as a result of the partnerships’ dissolution.