Definitions for capital gains deductions

Canadian-controlled private corporation

A private corporation that is a Canadian corporation other than any of the following:

  1. a corporation controlled, directly or indirectly in any way, by one or more non-resident persons, by one or more public corporations (other than a prescribed venture capital corporation), by one or more corporations described in paragraph c), or by any combination of the above
  2. a corporation that would be controlled by one person if that one person owned all the shares of any corporation that are owned by any non-resident person, by any public corporation (other than a prescribed venture capital corporation), or by a corporation described in paragraph c)
  3. a corporation, a class of the shares of capital stock of which is listed on a prescribed stock exchange

Qualified farm or fishing property

Qualified farm or fishing property is certain property you or your spouse or common-law partner owns. It is also certain property owned by a family-farm or fishing partnership in which you or your spouse or common-law partner holds an interest.

Qualified farm or fishing property (QFFP) includes the following:

  • a share of the capital stock of a family-farm or fishing corporation that you or your spouse or common-law partner owns
  • an interest in a family-farm or fishing partnership that you or your spouse or common-law partner owns
  • real property, such as land, buildings, and fishing vessels
  • property included in capital cost allowance Class 14.1, such as milk and egg quotas, or fishing licenses

For more information on what is considered to be qualified farm property, see guides T4002, Self-employed Business, Professional, Commission, Farming, and Fishing IncomeRC4060, Farming Income and the AgriStability and AgriInvest Programs Guide, or RC4408, Farming Income and the AgriStability and AgriInvest Programs Harmonized Guide.

Qualified small business corporation shares

A share of a corporation will be considered to be a qualified small business corporation share if all the following conditions are met:

  • at the time of sale, it was a share of the capital stock of a small business corporation (see below), and it was owned by you, your spouse or common-law partner, or a partnership of which you were a member;
  • throughout that part of the 24 months immediately before the share was disposed of, while the share was owned by you, a partnership of which you were a member, or a person related to you, it was a share of a Canadian-controlled private corporation (see above) and more than 50% of the fair market value of the assets of the corporation were:
    • used mainly in an active business carried on primarily in Canada by the Canadian-controlled private corporation, or by a related corporation
    • certain shares or debts of connected corporations
    • a combination of these 2 types of assets
  • throughout the 24 months immediately before the share was disposed of, no one owned the share other than you, a partnership of which you were a member, or a person related to you.

Generally, when a corporation has issued shares after June 13, 1988, either to you, to a partnership of which you are a member, or to a person related to you, a special situation exists. The CRA considers that, immediately before the shares were issued, they were owned by an unrelated person. As a result, to meet the holding-period requirement, the shares cannot have been owned by any person other than you, a partnership of which you are a member, or a person related to you for a 24-month period that begins after the shares were issued and that ends when you sold them.

However, this rule does not apply to shares issued in any of the following situations:

  • as payment for other shares
  • for dispositions of shares after June 17, 1987, as payment of a stock dividend
  • in connection with a property that you, a partnership of which you were a member, or a person related to you disposed of to the corporation that issued the shares. The property disposed of must have consisted of either:
    • all or most (90% or more) of the assets used in an active business carried on either by you, the members of the partnership of which you were a member, or the person related to you
    • an interest in a partnership where all or most (90% or more) of the partnership's assets were used in an active business carried on by the members of the partnership

Small business corporation

A Canadian-controlled private corporation in which all or most (90% or more) of the fair market value of its assets:

  • are used mainly in an active business carried on primarily in Canada by the corporation or by a related corporation;
  • are shares or debts of connected corporations that were small business corporations; or
  • are a combination of these 2 types of assets.
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