CRA indicates that an amalgamation of Acquireco with Targetco should be treated notwithstanding s. 87(2)(a) as being sequenced after the Targetco acquisition

On January 1, 202X, a resident individual (Mr. A) sold all the shares of Targetco for cash consideration to a resident arm’s-length purchase (Acquireco). No s. 256(9) election was made. Also on January 1, 202X, Targetco and Acquireco amalgamated without the certificate of amalgamation specifying the time at which the amalgamation took place.

CRA indicated that the time relevant to determining whether Targetco qualified as an SBC for purposes of the qualified small business corporation (QSBC) was the actual time of the disposition of the shares by Mr. A. It noted in this regard that s. 256(9) did not deem control of a corporation to be acquired at the beginning of the day for purposes of determining whether a corporation was an SBC.

Although the time of an amalgamation was generally considered to be the earliest time on the date of amalgamation in the absence of a particular time being specified in the certificate of amalgamation, here:

[F]or the purposes of determining whether the shares of the capital stock of Targetco qualified as a QSBCS at the time of their disposition by Mr. A, it would be reasonable to consider that the logical order of the transactions is, first, the disposition by Mr. A of the shares he held in the capital stock of Targetco, followed by the amalgamation between Targetco and Acquireco. Consequently, only the assets of Targetco, without taking into account those of Acquireco, should be taken into account in determining whether Targetco qualified as an SBC at the time of the disposition of the shares by Mr. A.

Thus, it was not relevant that Acquireco held the acquisition cash on January 1 prior to the acquisition and amalgamation.

Neal Armstrong. Summaries of 9 October 2025 APFF Roundtable, Q.3 under s. 256(9) and s. 87(2)(a).