Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
| 19(1) |
File No. 5-8958 |
| |
S. Leung |
| |
(613) 957-2116 |
November 15, 1989
Dear Sirs:
Re: Qualified Small Business Corporation Share ("QSBC Share")
We are writing in response to your letter of October 11, 1989 wherein you requested our opinion on whether, in the situation described below, the time during which the person held the shares of a corporation would be included in meeting the 24 month test pursuant to paragraph (b) of the definition of "QSBC Share" in subsection 110.6(1) of the Income Tax Act (the "Act").
Situation
A person transferred shares of a corporation to his spouse (the "individual"). Subsequent to the transfer but before the "determination time", as that expression is used in subsection 110.6(1) of the Act, the person was divorced form the individual. Consequently, at the determination time, the person is not related to the individual. The individual owns the shares of the corporation for less than 24 months immediately before the determination time.
Our Opinion
It is our opinion that in the situation outlined above, the person who transferred the shares must be related to the individual throughout the 24 months preceding the determination time in order for the shares to meet the requirement described in paragraph (b) of the definition of "QSBC Share" in subsection 110.6(1) of the Act. Our opinion is based on our observation that the wording used in paragraph (b) of the definition "QSBC Share" is different form that used in clause (c)(ii)(A) of that definition. In our opinion if it was intended that the relationship referred to in paragraph (b) of the definition need not be maintained throughout the entire 24 month period preceding the determination time, paragraph (b) would have been worded in a similar fashion to clause (c)(ii)(A) thereof.
As the person in the situation outlined above is no longer related to the individual after the divorce and before the determination time, the requirement described in paragraph (b) of the definition of "QSBC Share" in subsection 110.6(1) of the Act is not met. Consequently, in our view, the shares at issue would not be considered "QSBC Shares".
We trust these comments will be of assistance.
Yours truly,
for DirectorReorganizations and Non-Resident DivisionSpecialty Rulings DirectorateLegislative and IntergovernmentalAffairs Branch
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