CRA indicates that the s. 104(21.2) formula requires proportionate allocations of QSBCS gains

We have uploaded a copy of the questions posed at today’s 2022 STEP Roundtable and summaries of the CRA responses.

In response to Q.1, CRA indicated that the effect of the formula in s. 104(21.2) is to require a proportionate allocation of gains of a discretionary personal trust from the disposition of qualified small business corporation shares so that, for example, if it realized capital gains in the year from both public company shares and QSBC shares, it would be precluded under the formula from allocating a disproportionate share of its capital gains distributions for the year to one of its beneficiaries (who had unused capital gains deduction room) as a distribution of QSBCS gains, and from allocating a disproportionate share of its “ordinary” capital gains distributions to the other beneficiary, who no longer had access to the deduction.

Neal Armstrong. Summary of 15 June 2022 STEP Roundtable, Q.1 under s. 104(21.2).