Subsection 110.63(1)
Qualifying Canadian Entrepreneur Incentive Property
Administrative Policy
18 September 2025 CLHIA Roundtable Q. 2, 2025-1067931C6 - Deemed Value of Life Insurance and QSBC
application of s. 110.6(15)(a)(i) to “qualifying Canadian entrepreneur incentive property” definition
As the definition of qualified small business corporation share and small business corporation were not relevant to the determination of whether a disposition of a share of a subject corporation was a “qualifying business transfer” under the s. 248(1) definition for purposes of the employee ownership trust rules, the deeming rule in s. 110.6(15)(a)(i) did not apply for such purposes.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 84.1 - Subsection 84.1(2.31) - Paragraph 84.1(2.31)(b) - Subparagraph 84.1(2.31)(b)(iii) | application of s. 110.6(15)(a)(i) to ss. 84.1(2.31) and (2.32) | 26 |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Qualifying Business Transfer | non-application of s. 110.6(15)(a)(i) to “qualifying business transfer” definition | 62 |
Subsection 110.63(2)
Articles
Julien Théberge, "Benefiting from the Annual Increase in the CEI Limit by Using a Capital Gain Reserve", Canadian Tax Focus, Vol. 15, No, 1, February 2025, p. 2
Overview of CEI (p. 2)
- The Canadian entrepreneurs’ incentive (CEI) in draft s.110.63 reduces to 1/3 the inclusion rate for capital gains realized on the disposition of inter alia qualified farm or fishing property and qualified small business corporation shares, where specified conditions are satisfied. It is apparently still contemplated that it will apply to up to $400,000 of capital gains in 2025, which will increase by $400,000 each year until a lifetime maximum of $2 million is reached in 2029.
Use of capital gains reserve (p. 2)
- Access to the CEI can be enhanced through use of the capital gains reserve (as no equivalent of s. 110.6(31) applies here).
- For example, in 2025 an entrepreneur sells shares, qualifying for the CEI and having an ACB of $100, for $2,000,100. $400,020 is payable immediately, and the balance of $1,600,080 is to be paid equally as to $400,020 in each of the next four years.
- The entrepreneur will be able to claim a reserve each year, allowing the inclusion of a capital gain of $400,000 per year until 2029, thereby benefiting from the increase in the limit and enabling CEI claims for the years 2026 to 2029.