The capital gains deferral applies only to eligible small business corporation shares. Eligible small business corporation shares have the following characteristics:

• They consist of common shares issued by the corporation to you, the investor
• The issuing corporation must be an eligible small business corporation at the time the shares were issued
• The total carrying value of the assets of the corporation and related corporations cannot exceed $50 million immediately before, and immediately after, the share was issued. "Total carrying value of the assets of the corporation" means the amount at which the assets of the corporation would be valued for the purpose of the corporation’s balance sheet as of that time if it was prepared in accordance with generally accepted accounting principles used in Canada at that time. However, an asset of a corporation that is a share or debt issued by a related corporation is deemed to have a carrying value of nil
• While you hold the shares, the issuing corporation is an eligible active business corporation

To be able to defer the capital gain, you must have held the eligible small business corporation shares for more than 185 days from the date you acquired them.

The replacement shares have to be acquired at any time in the year in which the disposition is made or within 120 days after the end of that year.

Forms and publications

• Guide T4037, Capital Gains