Bill
C-208
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ENGLISHSUMMARYSUMMARY1 Income Tax Act1 Income Tax Act
Second Session, Forty-third Parliament,
69-70 Elizabeth II, 2020-2021
STATUTES OF CANADA 2021
CHAPTER 21
An Act to amend the Income Tax Act (transfer of small business or family farm or fishing corporation)
ASSENTED TO
June 29, 2021
BILL C-208
SUMMARY
This enactment amends the Income Tax Act in order to provide that, in the case of qualified small business corporation shares and shares of the capital stock of a family farm or fishing corporation, siblings are deemed not to be dealing at arm’s length and to be related, and that, under certain conditions, the transfer of those shares by a taxpayer to the taxpayer’s child or grandchild who is 18 years of age or older is to be excluded from the anti-avoidance rule of section 84.1.
Available on the House of Commons website at the following address:
www.ourcommons.ca
69-70 Elizabeth II
CHAPTER 21
An Act to amend the Income Tax Act (transfer of small business or family farm or fishing corporation)
[Assented to 29th June, 2021]
Her Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows:
R.S., c. 1 (5th Supp.)
Income Tax Act
1 Subparagraph 55(5)(e)(i) of the Income Tax Act is replaced by the following:
(i) a person shall be deemed to be dealing with another person at arm’s length and not to be related to the other person if the person is the brother or sister of the other person, except in the case where the dividend was received or paid, as part of a transaction or event or a series of transactions or events, by a corporation of which a share of the capital stock is a qualified small business corporation share or a share of the capital stock of a family farm or fishing corporation within the meaning of subsection 110.6(1),
2 (1) Subsection 84.1(2) of the Act is amended by striking out “and” at the end of paragraph (b), by adding “and” at the end of paragraph (d), and by adding the following after paragraph (d):
(e) if the subject shares are qualified small business corporation shares or shares of the capital stock of a family farm or fishing corporation within the meaning of subsection 110.6(1), the taxpayer and the purchaser corporation are deemed to be dealing at arm’s length if the purchaser corporation is controlled by one or more children or grandchildren of the taxpayer who are 18 years of age or older and if the purchaser corporation does not dispose of the subject shares within 60 months of their purchase.
(2) Section 84.1 of the Act is amended by adding the following after subsection (2.2):
Rules for paragraph 84.1(2)(e)
(2.3) For the purposes of paragraph (2)(e),
(a) if, otherwise than by reason of death, the purchaser corporation disposes of the subject shares within 60 months of their purchase:
(i) paragraph (2)(e) is deemed never to have applied,
(ii) the taxpayer is deemed, for the purposes of this section, to have disposed of the subject shares to the person who acquired them from the purchaser corporation, and
(iii) the period of 60 months applicable to the operation that is deemed to have taken place under subparagraph (ii) is deemed to have begun when the taxpayer disposed of the subject shares to the purchaser corporation;
(b) the deduction referred to in subsection 110.6(2) or (2.1) is, for a particular taxation year, the amount, if any, by which that deduction exceeds the amount determined by the formula:
A × B / $11,250
where
A
is the amount that would, but for this subsection, be the capital gains deduction referred to in subsection 110.6(2) or (2.1) for the particular taxation year; and
B
is the amount determined by the formula
0.00225 × (D - $10 million)
where
D
is
(a) if, in both the particular taxation year and the preceding taxation year, the corporation is not associated with any corporation, the taxable capital employed in Canada (within the meaning assigned by subsection 181.2(1) or 181.3(1) or section 181.4, as the case may be) of the corporation for the preceding taxation year,
(b) if, in the particular taxation year, the corporation is not associated with any corporation but was associated with one or more corporations in the preceding taxation year, the taxable capital employed in Canada (within the meaning assigned by subsection 181.2(1) or 181.3(1) or section 181.4, as the case may be) of the corporation for the particular taxation year, or
(c) if, in the particular taxation year, the corporation is associated with one or more particular corporations, the total of all amounts each of which is the taxable capital employed in Canada (within the meaning assigned by subsection 181.2(1) or 181.3(1) or section 181.4, as the case may be) of the corporation or of any of the particular corporations for its last taxation year that ended in the preceding calendar year; and
(c) the taxpayer must provide the Minister with an independent assessment of the fair market value of the subject shares and an affidavit signed by the taxpayer and by a third party attesting to the disposal of the shares.
Published under authority of the Speaker of the House of Commons
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