At the 2025 APFF conference, the CRA stated that the sisters in the following scenario would be related as per subparagraph 55(5)(e)(i):
- Sister A and Sister B each owned 100 percent of the shares of their respective holding corporations, whose shares did not qualify as QSBC shares.
- The holding corporations each held 50 percent of the shares in Opco.
- The factual scenario took for granted that Opco’s shares were QSBC shares.
- Opco redeemed the shares held by one of the holding corporations, giving rise to a deemed dividend.
The author notes that the CRA conclusion was surprising because it seemed to entail that Opco’s shares could be qualified small business corporation shares even though none of them were held by an individual. The CRA clarified its position, however, by subsequently stating that it assumed Sister A held at least one share of Opco directly.
Michel Gosselin-Trépanier “Subparagraph 55(5)(e)(i) and Related Persons: The CRA Sets the Record Straight” Canadian Tax Focus 16:2 (May 2026)
