I-3 - Taxation Act

Section 726.6.1 Disposition versions

2017-12-07

726.6.1. In this Title,

“qualified small business corporation share” of an individual, other than a trust that is not a personal trust, at any time, in this definition and the second paragraph referred to as the “determination time”, means a share of the capital stock of a corporation that,

(a)  at the determination time, is a share of the capital stock of a small business corporation owned by the individual, his spouse or a partnership related to the individual;

(b)  throughout the 24 months immediately preceding the determination time, was not owned by anyone other than the individual or a person or partnership related to the individual; and

(c)  throughout that part of the 24 months immediately preceding the determination time while it was owned by the individual or a person or partnership related to the individual, was a share of the capital stock of a Canadian-controlled private corporation more than 50% of the fair market value of the assets of which was attributable to

i.  assets used principally in a qualified business carried on primarily in Canada by the corporation or by a corporation related to it,

ii.  shares of the capital stock or indebtedness of one or more other corporations that are connected, within the meaning of the regulations, with the corporation, if the following conditions are met:

(1)  throughout that part of the 24 months immediately preceding the determination time that ends at the time the corporation acquired such a share or indebtedness, the share or indebtedness was not owned by anyone other than the corporation, a person or partnership related to the corporation or a person or partnership related to such a person or partnership, and

(2)  throughout that part of the 24 months immediately preceding the determination time while such a share or indebtedness was owned by the corporation, a person or partnership related to it or a person or partnership related to such a person or partnership, it was a share or indebtedness of a Canadian-controlled private corporation more than 50% of the fair market value of the assets of which was attributable to assets described in subparagraph iii, or

iii.  assets described in either of subparagraphs i and ii;

“share of the capital stock of a family farm or fishing corporation”, of an individual (other than a trust that is not a personal trust) at any time, means a share of the capital stock of a corporation owned by the individual at that time if

(a)  throughout any 24-month period ending before that time, more than 50% of the fair market value of the property owned by the corporation was attributable to

i.  property that was used principally in the course of carrying on a farming or fishing business in Canada in which an individual referred to in any of subparagraphs 2 to 4 was actively engaged on a regular and continuous basis, by

(1)  the corporation,

(2)  the individual,

(3)  if the individual is a personal trust, a beneficiary under the trust,

(4)  the spouse, a child or the father or mother of an individual referred to in subparagraph 2 or 3,

(5)  another corporation that is related to the corporation and of which a share of the capital stock was a share of the capital stock of a family farm or fishing corporation of an individual referred to in any of subparagraphs 2 to 4, or

(6)  a partnership, an interest in which was an interest in a family farm or fishing partnership of an individual referred to in any of subparagraphs 2 to 4,

ii.  shares of the capital stock or indebtedness of one or more corporations of which all or substantially all of the fair market value of the property was attributable to property described in subparagraph iv,

iii.  a partnership interest in or indebtedness of one or more partnerships of which all or substantially all of the fair market value of the property was attributable to property described in subparagraph iv, or

iv.  property described in any of subparagraphs i to iii; and

(b)  at that time, all or substantially all of the fair market value of the property owned by the corporation was attributable to property described in subparagraph iv of paragraph a.

For the purposes of the definition of “qualified small business corporation share” in the first paragraph,

(a)  where, for any period of time in the 24-month period ending at the determination time, all or substantially all of the fair market value of the assets of a particular corporation that is the corporation or another corporation that was connected with the corporation cannot be attributed to assets described in subparagraph i of subparagraph c of the said definition, shares or indebtedness of corporations described in subparagraph 2 of subparagraph ii of subparagraph c of the said definition, or any combination thereof, the reference in the said subparagraph 2 to “more than 50%” shall, for the particular period of time, be read as a reference to “all or substantially all” in respect of each other corporation that was connected with the particular corporation and, for the purposes of this subparagraph, a corporation is connected with another corporation only where

i.  the corporation is connected, within the meaning of the regulations, with the other corporation, and

ii.  the other corporation owns shares of the capital stock of the corporation and, for the purposes of this subparagraph, the other corporation is deemed to own the shares of the capital stock of any corporation that are owned by a corporation any shares of the capital stock of which are owned or are deemed by this subparagraph to be owned by the other corporation;

(b)  where, at any time in the 24-month period ending at the determination time, the share was substituted for another share, the share shall be considered to have met the requirements of the said definition only where the other share

i.  was not owned by any person or partnership other than a person or partnership described in subparagraph b of the said definition throughout the period commencing 24 months before the determination time and ending at the time of substitution, and

ii.  was a share of the capital stock of a corporation described in subparagraph c of the said definition throughout that part of the period referred to in subparagraph i during which such share was owned by a person or partnership described in subparagraph b of the said definition;

(c)  where, at any time in the 24-month period ending at the determination time, a share referred to in subparagraph ii of subparagraph c of the said definition was substituted for another share, that share shall be considered to have met the requirements of that subparagraph ii only where the other share

i.  was not owned by any person or partnership other than a person or partnership described in subparagraph 1 of subparagraph ii of subparagraph c of the said definition throughout the period commencing 24 months before the determination time and ending at the time of substitution, and

ii.  was a share of the capital stock of a corporation described in subparagraph c of the said definition throughout that part of the period referred to in subparagraph i during which such share was owned by a person or partnership described in subparagraph 1 of subparagraph ii of that subparagraph c;

(d)  a taxpayer is deemed to have disposed of shares that are identical properties in the order in which he acquired them;

(e)  in determining whether a corporation is a small business corporation or a Canadian-controlled private corporation at any time, a right referred to in paragraph b of section 20 shall not include a right under a purchase and sale agreement relating to a share of the capital stock of a corporation;

(f)  a personal trust is deemed

i.  to be related to a person or partnership for any period throughout which the person or partnership was a beneficiary of the trust, and

ii.  in respect of a share of the capital stock of a corporation, to be related to the person from whom it acquired the share where, at the time the trust disposed of the share, all of the beneficiaries, other than registered charities, of the trust were related to that person or would have been so related if that person were living at that time;

(g)  a partnership is deemed to be related to a person for any period throughout which the person was a member of the partnership;

(g.1)  a person who is a member of a partnership that is a member of another partnership is deemed to be a member of the other partnership;

(h)  a corporation that acquires shares of a class of the capital stock of another corporation from any person is deemed in respect of those shares to be related to the person where all or substantially all of the consideration received by that person from the corporation in respect of those shares was common shares of the capital stock of the corporation;

(i)  shares issued after 13 June 1988 by a corporation to a particular person or partnership are deemed to have been owned immediately before their issue by a person who was not related to the particular person or partnership unless the shares were issued

i.  as consideration for other shares,

ii.  as part of a transaction or series of transactions in which the particular person or partnership disposed of property to the corporation that consisted of

(1)  all or substantially all of the assets used in a qualified business carried on by the particular person or the members of that partnership, or

(2)  an interest in a partnership all or substantially all of the assets of which were used in a qualified business carried on by the members of the partnership, or

iii.  as payment of a stock dividend; and

(j)  where, immediately before the death of an individual, a share would, but for subparagraph a of the said definition, be a qualified small business corporation share of an individual, the share is deemed to be a qualified small business corporation share of the individual if it was a qualified small business corporation share of the individual at any time in the 12-month period immediately preceding the death of the individual.

For the purposes of the definitions of “qualified small business corporation share” and “share of the capital stock of a family farm or fishing corporation” in the first paragraph, the fair market value of a net income stabilization account or of a farm income stabilization account is deemed to be nil.

For the purposes of the definitions of “qualified small business corporation share” and “share of the capital stock of a family farm corporation” in the first paragraph, the fair market value of a net income stabilization account or of a farm income stabilization account is deemed to be nil.

1990, c. 59, s. 259; 1993, c. 16, s. 265; 1994, c. 22, s. 248; 1995, c. 49, s. 165; 1996, c. 39, s. 180; 1997, c. 3, s. 31; 2000, c. 5, s. 155; 2004, c. 21, s. 121; 2007, c. 12, s. 74; 2009, c. 5, s. 243; 2017, c. 29, s. 97.

2009-05-15

726.6.1. In this Title,

“qualified small business corporation share” of an individual, other than a trust that is not a personal trust, at any time, in this definition and the second paragraph referred to as the “determination time”, means a share of the capital stock of a corporation that,

(a)  at the determination time, is a share of the capital stock of a small business corporation owned by the individual, his spouse or a partnership related to the individual;

(b)  throughout the 24 months immediately preceding the determination time, was not owned by anyone other than the individual or a person or partnership related to the individual; and

(c)  throughout that part of the 24 months immediately preceding the determination time while it was owned by the individual or a person or partnership related to the individual, was a share of the capital stock of a Canadian-controlled private corporation more than 50% of the fair market value of the assets of which was attributable to

i.  assets used principally in a qualified business carried on primarily in Canada by the corporation or by a corporation related to it,

ii.  shares of the capital stock or indebtedness of one or more other corporations that are connected, within the meaning of the regulations, with the corporation, if the following conditions are met:

(1)  throughout that part of the 24 months immediately preceding the determination time that ends at the time the corporation acquired such a share or indebtedness, the share or indebtedness was not owned by anyone other than the corporation, a person or partnership related to the corporation or a person or partnership related to such a person or partnership, and

(2)  throughout that part of the 24 months immediately preceding the determination time while such a share or indebtedness was owned by the corporation, a person or partnership related to it or a person or partnership related to such a person or partnership, it was a share or indebtedness of a Canadian-controlled private corporation more than 50% of the fair market value of the assets of which was attributable to assets described in subparagraph iii, or

iii.  assets described in either of subparagraphs i and ii;

“share of the capital stock of a family farm corporation” of an individual, other than a trust that is not a personal trust, at any time means a share of the capital stock of a corporation owned by the individual at that time, if the following conditions are met:

(a)  throughout any 24-month period ending before that time, more than 50% of the fair market value of the property owned by the corporation was attributable to

i.  property that has been used by a person or partnership referred to in any of subparagraphs 1 to 5 principally in the course of carrying on a business of farming in Canada in which an individual referred to in any of subparagraphs 2 to 4 was actively engaged on a regular and continuous basis:

(1)  the corporation,

(2)  the individual,

(3)  where the individual is a personal trust, a beneficiary of the trust,

(4)  the spouse, a child or the father or mother of the individual referred to in subparagraph 2 or 3,

(4.1)  another corporation that is related to the corporation and of which a share of the capital stock was a share of the capital stock of a family farm corporation of an individual referred to in any of subparagraphs 2 to 4, or

(5)  a partnership an interest in which was an interest in a family farm partnership of an individual referred to in any of subparagraphs 2 to 4,

ii.  shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to the property described in subparagraph iii,

ii.1.  a partnership interest or indebtedness of one or more partnerships all or substantially all of the fair market value of the property of which was attributable to property described in subparagraph iii, or

iii.  property described in any of subparagraphs i to ii.1;

(b)  at that time, all or substantially all of the fair market value of the property owned by the corporation was attributable to property described in subparagraph iii of paragraph a;

“share of the capital stock of a family fishing corporation” of an individual, other than a trust that is not a personal trust, at any time means a share of the capital stock of a corporation owned by the individual at that time if

(a)  throughout any 24-month period ending before that time, more than 50% of the fair market value of the property owned by the corporation was attributable to

i.  property that was used principally in the course of carrying on a fishing business in Canada in which an individual referred to in any of subparagraphs 2 to 4 was actively engaged on a regular and continuous basis by

(1)  the corporation,

(2)  the individual,

(3)  if the individual is a personal trust, a beneficiary under the trust,

(4)  the spouse, a child or the father or mother of an individual referred to in subparagraph 2 or 3,

(5)  another corporation that is related to the corporation and of which a share of the capital stock was a share of the capital stock of a family fishing corporation of an individual referred to in any of subparagraphs 2 to 4, or

(6)  a partnership, an interest in which was an interest in a family fishing partnership of an individual referred to in any of subparagraphs 2 to 4,

ii.  shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to property described in subparagraph iv,

iii.  a partnership interest or indebtedness of one or more partnerships all or substantially all of the fair market value of the property of which was attributable to property described in subparagraph iv, or

iv.  property described in any of subparagraphs i to iii; and

(b)  at that time, all or substantially all of the fair market value of the property owned by the corporation was attributable to property described in subparagraph iv of paragraph a.

For the purposes of the definition of “qualified small business corporation share” in the first paragraph,

(a)  where, for any period of time in the 24-month period ending at the determination time, all or substantially all of the fair market value of the assets of a particular corporation that is the corporation or another corporation that was connected with the corporation cannot be attributed to assets described in subparagraph i of subparagraph c of the said definition, shares or indebtedness of corporations described in subparagraph 2 of subparagraph ii of subparagraph c of the said definition, or any combination thereof, the reference in the said subparagraph 2 to “more than 50%” shall, for the particular period of time, be read as a reference to “all or substantially all” in respect of each other corporation that was connected with the particular corporation and, for the purposes of this subparagraph, a corporation is connected with another corporation only where

i.  the corporation is connected, within the meaning of the regulations, with the other corporation, and

ii.  the other corporation owns shares of the capital stock of the corporation and, for the purposes of this subparagraph, the other corporation is deemed to own the shares of the capital stock of any corporation that are owned by a corporation any shares of the capital stock of which are owned or are deemed by this subparagraph to be owned by the other corporation;

(b)  where, at any time in the 24-month period ending at the determination time, the share was substituted for another share, the share shall be considered to have met the requirements of the said definition only where the other share

i.  was not owned by any person or partnership other than a person or partnership described in subparagraph b of the said definition throughout the period commencing 24 months before the determination time and ending at the time of substitution, and

ii.  was a share of the capital stock of a corporation described in subparagraph c of the said definition throughout that part of the period referred to in subparagraph i during which such share was owned by a person or partnership described in subparagraph b of the said definition;

(c)  where, at any time in the 24-month period ending at the determination time, a share referred to in subparagraph ii of subparagraph c of the said definition was substituted for another share, that share shall be considered to have met the requirements of that subparagraph ii only where the other share

i.  was not owned by any person or partnership other than a person or partnership described in subparagraph 1 of subparagraph ii of subparagraph c of the said definition throughout the period commencing 24 months before the determination time and ending at the time of substitution, and

ii.  was a share of the capital stock of a corporation described in subparagraph c of the said definition throughout that part of the period referred to in subparagraph i during which such share was owned by a person or partnership described in subparagraph 1 of subparagraph ii of that subparagraph c;

(d)  a taxpayer is deemed to have disposed of shares that are identical properties in the order in which he acquired them;

(e)  in determining whether a corporation is a small business corporation or a Canadian-controlled private corporation at any time, a right referred to in paragraph b of section 20 shall not include a right under a purchase and sale agreement relating to a share of the capital stock of a corporation;

(f)  a personal trust is deemed

i.  to be related to a person or partnership for any period throughout which the person or partnership was a beneficiary of the trust, and

ii.  in respect of a share of the capital stock of a corporation, to be related to the person from whom it acquired the share where, at the time the trust disposed of the share, all of the beneficiaries, other than registered charities, of the trust were related to that person or would have been so related if that person were living at that time;

(g)  a partnership is deemed to be related to a person for any period throughout which the person was a member of the partnership;

(g.1)  a person who is a member of a partnership that is a member of another partnership is deemed to be a member of the other partnership;

(h)  a corporation that acquires shares of a class of the capital stock of another corporation from any person is deemed in respect of those shares to be related to the person where all or substantially all of the consideration received by that person from the corporation in respect of those shares was common shares of the capital stock of the corporation;

(i)  shares issued after 13 June 1988 by a corporation to a particular person or partnership are deemed to have been owned immediately before their issue by a person who was not related to the particular person or partnership unless the shares were issued

i.  as consideration for other shares,

ii.  as part of a transaction or series of transactions in which the particular person or partnership disposed of property to the corporation that consisted of

(1)  all or substantially all of the assets used in a qualified business carried on by the particular person or the members of that partnership, or

(2)  an interest in a partnership all or substantially all of the assets of which were used in a qualified business carried on by the members of the partnership, or

iii.  as payment of a stock dividend; and

(j)  where, immediately before the death of an individual, a share would, but for subparagraph a of the said definition, be a qualified small business corporation share of an individual, the share is deemed to be a qualified small business corporation share of the individual if it was a qualified small business corporation share of the individual at any time in the 12-month period immediately preceding the death of the individual.

For the purposes of the definition of “qualified small business corporation share” in the first paragraph and of subparagraph f of the second paragraph, a personal trust is deemed to include a trust a trustee of which holds a share for an employee in accordance with section 53.

For the purposes of the definitions of “qualified small business corporation share” and “share of the capital stock of a family farm corporation” in the first paragraph, the fair market value of a net income stabilization account or of a farm income stabilization account is deemed to be nil.

1990, c. 59, s. 259; 1993, c. 16, s. 265; 1994, c. 22, s. 248; 1995, c. 49, s. 165; 1996, c. 39, s. 180; 1997, c. 3, s. 31; 2000, c. 5, s. 155; 2004, c. 21, s. 121; 2007, c. 12, s. 74; 2009, c. 5, s. 243.

2007-11-07

726.6.1. In this Title,

“qualified small business corporation share” of an individual, other than a trust that is not a personal trust, at any time, in this definition and the second paragraph referred to as the “determination time”, means a share of the capital stock of a corporation that,

(a)  at the determination time, is a share of the capital stock of a small business corporation owned by the individual, his spouse or a partnership related to the individual;

(b)  throughout the 24 months immediately preceding the determination time, was not owned by anyone other than the individual or a person or partnership related to the individual; and

(c)  throughout that part of the 24 months immediately preceding the determination time while it was owned by the individual or a person or partnership related to the individual, was a share of the capital stock of a Canadian-controlled private corporation more than 50% of the fair market value of the assets of which was attributable to

i.  assets used principally in a qualified business carried on primarily in Canada by the corporation or by a corporation related to it,

ii.  shares of the capital stock or indebtedness of one or more other corporations that are connected, within the meaning of the regulations, with the corporation, if the following conditions are met:

(1)  throughout that part of the 24 months immediately preceding the determination time that ends at the time the corporation acquired such a share or indebtedness, the share or indebtedness was not owned by anyone other than the corporation, a person or partnership related to the corporation or a person or partnership related to such a person or partnership, and

(2)  throughout that part of the 24 months immediately preceding the determination time while such a share or indebtedness was owned by the corporation, a person or partnership related to it or a person or partnership related to such a person or partnership, it was a share or indebtedness of a Canadian-controlled private corporation more than 50% of the fair market value of the assets of which was attributable to assets described in subparagraph iii, or

iii.  assets described in either of subparagraphs i and ii;

“share of the capital stock of a family farm corporation” of an individual, other than a trust that is not a personal trust, at any time means a share of the capital stock of a corporation owned by the individual at that time, if the following conditions are met:

(a)  throughout any 24-month period ending before that time, more than 50% of the fair market value of the property owned by the corporation was attributable to

i.  property that has been used by a person or partnership referred to in any of subparagraphs 1 to 5 principally in the course of carrying on a business of farming in Canada in which an individual referred to in any of subparagraphs 2 to 4 was actively engaged on a regular and continuous basis:

(1)  the corporation,

(2)  the individual,

(3)  where the individual is a personal trust, a beneficiary of the trust,

(4)  the spouse, a child or the father or mother of the individual referred to in subparagraph 2 or 3,

(4.1)  another corporation that is related to the corporation and of which a share of the capital stock was a share of the capital stock of a family farm corporation of an individual referred to in any of subparagraphs 2 to 4, or

(5)  a partnership an interest in which was an interest in a family farm partnership of an individual referred to in any of subparagraphs 2 to 4,

ii.  shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to the property described in subparagraph iii,

ii.1.  a partnership interest or indebtedness of one or more partnerships all or substantially all of the fair market value of the property of which was attributable to property described in subparagraph iii, or

iii.  property described in any of subparagraphs i to ii.1;

(b)  at that time, all or substantially all of the fair market value of the property owned by the corporation was attributable to property described in subparagraph iii of paragraph a;

“share of the capital stock of a family fishing corporation” of an individual, other than a trust that is not a personal trust, at any time means a share of the capital stock of a corporation owned by the individual at that time if

(a)  throughout any 24-month period ending before that time, more than 50% of the fair market value of the property owned by the corporation was attributable to

i.  property that was used principally in the course of carrying on a fishing business in Canada in which an individual referred to in any of subparagraphs 2 to 4 was actively engaged on a regular and continuous basis by

(1)  the corporation,

(2)  the individual,

(3)  if the individual is a personal trust, a beneficiary under the trust,

(4)  the spouse, a child or the father or mother of an individual referred to in subparagraph 2 or 3,

(5)  another corporation that is related to the corporation and of which a share of the capital stock was a share of the capital stock of a family fishing corporation of an individual referred to in any of subparagraphs 2 to 4, or

(6)  a partnership, an interest in which was an interest in a family fishing partnership of an individual referred to in any of subparagraphs 2 to 4,

ii.  shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to property described in subparagraph iv,

iii.  a partnership interest or indebtedness of one or more partnerships all or substantially all of the fair market value of the property of which was attributable to property described in subparagraph iv, or

iv.  property described in any of subparagraphs i to iii; and

(b)  at that time, all or substantially all of the fair market value of the property owned by the corporation was attributable to property described in subparagraph iv of paragraph a.

For the purposes of the definition of “qualified small business corporation share” in the first paragraph,

(a)  where, for any period of time in the 24-month period ending at the determination time, all or substantially all of the fair market value of the assets of a particular corporation that is the corporation or another corporation that was connected with the corporation cannot be attributed to assets described in subparagraph i of subparagraph c of the said definition, shares or indebtedness of corporations described in subparagraph 2 of subparagraph ii of subparagraph c of the said definition, or any combination thereof, the reference in the said subparagraph 2 to “more than 50%” shall, for the particular period of time, be read as a reference to “all or substantially all” in respect of each other corporation that was connected with the particular corporation and, for the purposes of this subparagraph, a corporation is connected with another corporation only where

i.  the corporation is connected, within the meaning of the regulations, with the other corporation, and

ii.  the other corporation owns shares of the capital stock of the corporation and, for the purposes of this subparagraph, the other corporation is deemed to own the shares of the capital stock of any corporation that are owned by a corporation any shares of the capital stock of which are owned or are deemed by this subparagraph to be owned by the other corporation;

(b)  where, at any time in the 24-month period ending at the determination time, the share was substituted for another share, the share shall be considered to have met the requirements of the said definition only where the other share

i.  was not owned by any person or partnership other than a person or partnership described in subparagraph b of the said definition throughout the period commencing 24 months before the determination time and ending at the time of substitution, and

ii.  was a share of the capital stock of a corporation described in subparagraph c of the said definition throughout that part of the period referred to in subparagraph i during which such share was owned by a person or partnership described in subparagraph b of the said definition;

(c)  where, at any time in the 24-month period ending at the determination time, a share referred to in subparagraph ii of subparagraph c of the said definition was substituted for another share, that share shall be considered to have met the requirements of that subparagraph ii only where the other share

i.  was not owned by any person or partnership other than a person or partnership described in subparagraph 1 of subparagraph ii of subparagraph c of the said definition throughout the period commencing 24 months before the determination time and ending at the time of substitution, and

ii.  was a share of the capital stock of a corporation described in subparagraph c of the said definition throughout that part of the period referred to in subparagraph i during which such share was owned by a person or partnership described in subparagraph 1 of subparagraph ii of that subparagraph c;

(d)  a taxpayer is deemed to have disposed of shares that are identical properties in the order in which he acquired them;

(e)  in determining whether a corporation is a small business corporation or a Canadian-controlled private corporation at any time, a right referred to in paragraph b of section 20 shall not include a right under a purchase and sale agreement relating to a share of the capital stock of a corporation;

(f)  a personal trust is deemed

i.  to be related to a person or partnership for any period throughout which the person or partnership was a beneficiary of the trust, and

ii.  in respect of a share of the capital stock of a corporation, to be related to the person from whom it acquired the share where, at the time the trust disposed of the share, all of the beneficiaries, other than registered charities, of the trust were related to that person or would have been so related if that person were living at that time;

(g)  a partnership is deemed to be related to a person for any period throughout which the person was a member of the partnership;

(h)  a corporation that acquires shares of a class of the capital stock of another corporation from any person is deemed in respect of those shares to be related to the person where all or substantially all of the consideration received by that person from the corporation in respect of those shares was common shares of the capital stock of the corporation;

(i)  shares issued after 13 June 1988 by a corporation to a particular person or partnership are deemed to have been owned immediately before their issue by a person who was not related to the particular person or partnership unless the shares were issued

i.  as consideration for other shares,

ii.  as part of a transaction or series of transactions in which the particular person or partnership disposed of property to the corporation that consisted of

(1)  all or substantially all of the assets used in a qualified business carried on by the particular person or the members of that partnership, or

(2)  an interest in a partnership all or substantially all of the assets of which were used in a qualified business carried on by the members of the partnership, or

iii.  as payment of a stock dividend; and

(j)  where, immediately before the death of an individual, a share would, but for subparagraph a of the said definition, be a qualified small business corporation share of an individual, the share is deemed to be a qualified small business corporation share of the individual if it was a qualified small business corporation share of the individual at any time in the 12-month period immediately preceding the death of the individual.

For the purposes of the definition of “qualified small business corporation share” in the first paragraph and of subparagraph f of the second paragraph, a personal trust is deemed to include a trust a trustee of which holds a share for an employee in accordance with section 53.

For the purposes of the definitions of “qualified small business corporation share” and “share of the capital stock of a family farm corporation” in the first paragraph, the fair market value of a net income stabilization account or of a farm income stabilization account is deemed to be nil.

1990, c. 59, s. 259; 1993, c. 16, s. 265; 1994, c. 22, s. 248; 1995, c. 49, s. 165; 1996, c. 39, s. 180; 1997, c. 3, s. 31; 2000, c. 5, s. 155; 2004, c. 21, s. 121; 2007, c. 12, s. 74.

2006-03-01

726.6.1. In this Title,

“qualified small business corporation share” of an individual, other than a trust that is not a personal trust, at any time, in this definition and the second paragraph referred to as the “determination time”, means a share of the capital stock of a corporation that,

(a)  at the determination time, is a share of the capital stock of a small business corporation owned by the individual, his spouse or a partnership related to the individual;

(b)  throughout the 24 months immediately preceding the determination time, was not owned by anyone other than the individual or a person or partnership related to the individual; and

(c)  throughout that part of the 24 months immediately preceding the determination time while it was owned by the individual or a person or partnership related to the individual, was a share of the capital stock of a Canadian-controlled private corporation more than 50% of the fair market value of the assets of which was attributable to

i.  assets used principally in a qualified business carried on primarily in Canada by the corporation or by a corporation related to it,

ii.  shares of the capital stock or indebtedness of one or more other corporations that are connected, within the meaning of the regulations, with the corporation, if the following conditions are met:

(1)  throughout that part of the 24 months immediately preceding the determination time that ends at the time the corporation acquired such a share or indebtedness, the share or indebtedness was not owned by anyone other than the corporation, a person or partnership related to the corporation or a person or partnership related to such a person or partnership, and

(2)  throughout that part of the 24 months immediately preceding the determination time while such a share or indebtedness was owned by the corporation, a person or partnership related to it or a person or partnership related to such a person or partnership, it was a share or indebtedness of a Canadian-controlled private corporation more than 50% of the fair market value of the assets of which was attributable to assets described in subparagraph iii, or

iii.  assets described in either of subparagraphs i and ii;

“share of the capital stock of a family farm corporation” of an individual, other than a trust that is not a personal trust, at any time means a share of the capital stock of a corporation owned by the individual at that time, if the following conditions are met:

(a)  throughout any 24-month period ending before that time, more than 50% of the fair market value of the property owned by the corporation was attributable to

i.  property that has been used by a person or partnership referred to in any of subparagraphs 1 to 5 principally in the course of carrying on a business of farming in Canada in which an individual referred to in any of subparagraphs 2 to 4 was actively engaged on a regular and continuous basis:

(1)  the corporation,

(2)  the individual,

(3)  where the individual is a personal trust, a beneficiary of the trust,

(4)  the spouse, a child or the father or mother of the individual referred to in subparagraph 2 or 3, or

(5)  a partnership an interest in which was an interest in a family farm partnership of an individual referred to in any of subparagraphs 2 to 4,

ii.  shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to the property described in subparagraph iii, or

iii.  property described in either subparagraph i or ii;

(b)  at that time, all or substantially all of the fair market value of the property owned by the corporation was attributable to

i.  property that has been used by the corporation or a person or partnership referred to in subparagraph i of subparagraph a principally in the course of carrying on a business of farming in Canada,

ii.  shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to property described in subparagraph iii, or

iii.  property described in either subparagraph i or ii.

For the purposes of the definition of “qualified small business corporation share” in the first paragraph,

(a)  where, for any period of time in the 24-month period ending at the determination time, all or substantially all of the fair market value of the assets of a particular corporation that is the corporation or another corporation that was connected with the corporation cannot be attributed to assets described in subparagraph i of subparagraph c of the said definition, shares or indebtedness of corporations described in subparagraph 2 of subparagraph ii of subparagraph c of the said definition, or any combination thereof, the reference in the said subparagraph 2 to “more than 50%” shall, for the particular period of time, be read as a reference to “all or substantially all” in respect of each other corporation that was connected with the particular corporation and, for the purposes of this subparagraph, a corporation is connected with another corporation only where

i.  the corporation is connected, within the meaning of the regulations, with the other corporation, and

ii.  the other corporation owns shares of the capital stock of the corporation and, for the purposes of this subparagraph, the other corporation is deemed to own the shares of the capital stock of any corporation that are owned by a corporation any shares of the capital stock of which are owned or are deemed by this subparagraph to be owned by the other corporation;

(b)  where, at any time in the 24-month period ending at the determination time, the share was substituted for another share, the share shall be considered to have met the requirements of the said definition only where the other share

i.  was not owned by any person or partnership other than a person or partnership described in subparagraph b of the said definition throughout the period commencing 24 months before the determination time and ending at the time of substitution, and

ii.  was a share of the capital stock of a corporation described in subparagraph c of the said definition throughout that part of the period referred to in subparagraph i during which such share was owned by a person or partnership described in subparagraph b of the said definition;

(c)  where, at any time in the 24-month period ending at the determination time, a share referred to in subparagraph ii of subparagraph c of the said definition was substituted for another share, that share shall be considered to have met the requirements of that subparagraph ii only where the other share

i.  was not owned by any person or partnership other than a person or partnership described in subparagraph 1 of subparagraph ii of subparagraph c of the said definition throughout the period commencing 24 months before the determination time and ending at the time of substitution, and

ii.  was a share of the capital stock of a corporation described in subparagraph c of the said definition throughout that part of the period referred to in subparagraph i during which such share was owned by a person or partnership described in subparagraph 1 of subparagraph ii of that subparagraph c;

(d)  a taxpayer is deemed to have disposed of shares that are identical properties in the order in which he acquired them;

(e)  in determining whether a corporation is a small business corporation or a Canadian-controlled private corporation at any time, a right referred to in paragraph b of section 20 shall not include a right under a purchase and sale agreement relating to a share of the capital stock of a corporation;

(f)  a personal trust is deemed

i.  to be related to a person or partnership for any period throughout which the person or partnership was a beneficiary of the trust, and

ii.  in respect of a share of the capital stock of a corporation, to be related to the person from whom it acquired the share where, at the time the trust disposed of the share, all of the beneficiaries, other than registered charities, of the trust were related to that person or would have been so related if that person were living at that time;

(g)  a partnership is deemed to be related to a person for any period throughout which the person was a member of the partnership;

(h)  a corporation that acquires shares of a class of the capital stock of another corporation from any person is deemed in respect of those shares to be related to the person where all or substantially all of the consideration received by that person from the corporation in respect of those shares was common shares of the capital stock of the corporation;

(i)  shares issued after 13 June 1988 by a corporation to a particular person or partnership are deemed to have been owned immediately before their issue by a person who was not related to the particular person or partnership unless the shares were issued

i.  as consideration for other shares,

ii.  as part of a transaction or series of transactions in which the particular person or partnership disposed of property to the corporation that consisted of

(1)  all or substantially all of the assets used in a qualified business carried on by the particular person or the members of that partnership, or

(2)  an interest in a partnership all or substantially all of the assets of which were used in a qualified business carried on by the members of the partnership, or

iii.  as payment of a stock dividend; and

(j)  where, immediately before the death of an individual, a share would, but for subparagraph a of the said definition, be a qualified small business corporation share of an individual, the share is deemed to be a qualified small business corporation share of the individual if it was a qualified small business corporation share of the individual at any time in the 12-month period immediately preceding the death of the individual.

For the purposes of the definition of “qualified small business corporation share” in the first paragraph and of subparagraph f of the second paragraph, a personal trust is deemed to include a trust a trustee of which holds a share for an employee in accordance with section 53.

For the purposes of the definitions of “qualified small business corporation share” and “share of the capital stock of a family farm corporation” in the first paragraph, the fair market value of a net income stabilization account or of a farm income stabilization account is deemed to be nil.

1990, c. 59, s. 259; 1993, c. 16, s. 265; 1994, c. 22, s. 248; 1995, c. 49, s. 165; 1996, c. 39, s. 180; 1997, c. 3, s. 31; 2000, c. 5, s. 155; 2004, c. 21, s. 121.