CRA confirms that the retention of Opco’s real estate in the parent’s Realtyco after a sale of Opco to the child’s Holdco does not render Realtyco a relevant group entity

Mr. A wholly owned Opco, whose shares qualified as qualified small business corporation shares (QSBCS), and Holdco, which leased commercial property to Opco for use in its Canadian active business, so that the rents were deemed under s. 129(6) to be active business income. Mr. A disposed of the Opco shares to a holding company of his adult child (the purchaser). If this disposition satisfied the other requirements of s. 84.1(2.31), it nonetheless would not satisfy those rules if Holdco constituted a relevant group entity.

In finding that it was not, CRA indicated that Opco's assets could not be considered to be used in a business of Holdco nor, on the facts, did Opco hold shares or debt of Holdco or a debt payable by Holdco. Therefore, it could not be concluded that the business carried on by Holdco could be relevant in determining whether shares of Opco constituted QSBCS at the disposition time.

The same conclusion was reached more briefly in 2024-1036641E5 F.

Neal Armstrong. Summary of 6 May 2025 External T.I. 2024-1010641E5 F under s. 84.1(2.31)(c)(iii).