CRA confirms that the QSBCS exception to s. 55(5)(e)(i) applied to the repurchase of QSBCS held by a sibling’s Holdco simultaneously with the repurchase of the other sibling’s Holdco’s non-QSBCS

Two sisters (A and B) each held, through their respective wholly-owned Holdcos (Holdco A and Holdco B) 50% of the shares of Opco, which were qualified small business corporation shares (QSBCS), and 50% of the shares of Investmentco, which were not.

Opco repurchased its shares held by Holdco B, and Investmentco simultaneously repurchased its shares held by Holdco A.

At issue was the rule in s. 55(5)(e)(i) deeming siblings to be unrelated for s. 55 purposes and the exception to that rule (also stated in s. 55(5)(e)(i)) for where a dividend is paid on a QSBCS. CRA confirmed that the repurchase by Opco would not be subject to s. 55(2) by virtue of such exception (even though such repurchase occurred as part of the same series of transactions as the repurchase by Investmentco), and that the repurchase by Investmentco would be subject to s. 55(2) since such exception was inapplicable.

Neal Armstrong. Summary of 9 October 2025 APFF Roundtable, Q.9 under s. 55(5)(e)(i).