CRA finds that a corp. held 50-50 by two 100% grandchildren of A was closely related for ETA purposes to A and to another 100% grandchild of A
One of the requirements for the ETA s. 156 nil consideration election is that the parties be closely related. The basic building block for the closely-related definition is the concept of a “qualifying subsidiary,” which references the holding of 90% or more of the value and number of the issued and outstanding shares, having full voting rights under all circumstances, of the mooted subsidiary. There is a somewhat ambiguous reference in ETA s. 128(1)(a)(v) to the 90% closely-related test being satisfied by a “combination” of corporations.
This did not give CRA pause, and it found that a corporation which was held on a 50-50 basis by two wholly-owned grandchildren of A was closely related to A as well as to another wholly-owned grandchild of A held through another chain.
Neal Armstrong. Summary of 11 October 2017 Interpretation 181628 under ETA s. 128(1)(a)(v).