Apple Final Cut Pro 7 - Manual (Page 166)

166 Chapter 8 Adding Video Filters and Transitions
If you want to use transitions between clips, you should plan the In and Out points of
your clips to allow a transition to occur without affecting the content you want shown.
The content you want to appear before and after the transition must be located as
shown below.
First complete frame
of the incoming clip
Last complete frame
of the outgoing clip