CRA indicates that the parents referred to in the ss. 84.1(2.31)/(2.32) rules can be trustees of a trust holding the purchaser corporation or contingent residuary beneficiaries of such trust

Can shares (which do not amount to control) of the purchaser corporation referred to in s. 84.1(2.31) or (2.32) be held by a trust where:

• the parent is a contingent beneficiary in the event of death of a child or all members of the child group, or
• the parent and the parent’s spouse or common-law partner are sole trustees or a majority of the trustees.

CRA noted that the context of this question was the rules in ss. 84.1(2.31)/(2.32)(d) and (e) which provide that the parents, from the time of the disposition of the subject shares, cannot own, directly or indirectly, 50% or more of the shares of any class of the purchaser corporation or the subject corporation other than certain non-voting preferred shares and that, within 36 months of the disposition, must have ceased owning, directly or indirectly, any shares of the purchaser corporation or the subject corporation other than those certain non-voting preferred shares.[

Turning then to the look-through rule in s. 84.1(2.3)(c)(ii) as to the meaning of “own, directly or indirectly,” CRA indicated that it would not consider a person to have an interest in a trust if that person's interest depended solely on the occurrence of an uncertain event, such as a child predeceasing a parent so that, during the lifetime of such child or relevant members of the child group, the parent with such contingent interest would not be considered to own any shares of the purchaser corporation held by the trust.

Regarding the parents as trustees, CRA indicated that it would not consider them in such capacity to own shares of the purchaser corporation for purposes of the share ownership limitations in s. 84.1(2.31)(d) and (e), and in ss. 84.1(2.32)(d) to (f). It would apply the look-through rule in s. 84.1(2.3)(c)(ii) and, if applicable, the deeming rule in respect of discretionary interests in s. 84.1(2.3)(d), to determine who owned directly or indirectly any property held by the trust.

Neal Armstrong. Summaries of 17 June 2025 STEP Roundtable, Q.2 under s. 84.1(2.3)(c)(ii) and s. 84.1(2.31)(d).