The CRA has clarified that the subparagraph 55(5)(e)(i) exception for siblings will apply where
- the shares of either the distributing corporation (DC) or the transferee corporation (TC) (not both) need be quaified small business corporation shares or shares of a family farm or fishing corporation (2021-0921261E5), and
- the foregoing status test is met by DC or the TCs immediately before and immediately after the series of transactions that compose the butterfly (CRA document no. 2023-0980661R3, as amended by CRA document nos. 2024-1021891R3, and 2024-1031861R3).
Caroline Morin “Butterfly Transactions for Siblings After Bill C-208: CRA Guidance Brings Needed Clarity” Tax for the Owner-Manager 26:3 (July 2026)
