CRA indicates that settling QSBCS shares on a personal trust with related beneficiaries before a sale of those shares 6 months later would not cause QSBCS status to be lost

An individual who transferred all his long-term holding of the shares of a corporation which otherwise would have qualified as qualified small business corporation shares (QSBCS) to a personal trust whose only beneficiaries were his two children. Six months after that, the trust disposed of the shares to an unrelated third party.

CRA indicated that the mere fact that the trust had not been in existence for 24 months at the time of such disposition would not prevent the shares from qualifying as QSBCS. Furthermore, in order for the 24-month holding period requirement set out in para. (b) of the QSBCS definition to be met, the trust and the person from whom it acquired the shares (the individual) needed to be related under s. 110.6(14)(c)(ii) (which appeared to be the case since, at the time of the disposition, all of the beneficiaries of the trust were related to the individual).

Neal Armstrong. Summary of 28 March 2025 External T.I. 2016-0662951E5 F under s. 110.6(1) – QSBCS – (b).