Lines 1 and 2 - Qualified small business corporation shares (QSBCS) and qualified farm or fishing property (QFFP)

Lines 1 and 2 - Qualified small business corporation shares (QSBCS) and qualified farm or fishing property (QFFP)

Use these sections if you are filing a return for a personal trust reporting a capital gain or loss from the disposition of qualified small business corporation shares or qualified farm or fishing property. For more information, see Guide T4037, Capital Gains.

Do not report a loss the trust incurred in disposing of shares of, or debts owing by, a small business corporation in an arm's length transaction. For information on these types of losses, see "Line 20 - Allowable business investment loss (ABIL)"on page 34.

Capital gains from the disposition of qualified small business corporation shares, or qualified farm or fishing property may qualify for the capital gains deduction where the personal trust is allocating and designating the eligible capital gains to a beneficiary. Complete Schedules 3 and 4, and see "How to complete the T3 slip"on page 77.

It is important that gains realized on the disposition of qualified small business corporation shares (QSBCS) and qualified farm or fishing property (QFFP) are reported in Period 1 or Period 2 based on the date of disposition of the property.

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

• at the time of disposition, it was a share of the capital stock of a small business corporation and was owned by the personal trust, or a partnership related to the personal trust

• throughout the 24 months before the disposition, only the personal trust, or a person or a partnership related to the personal trust, owned the share

• throughout that part of the 24 months immediately before the disposition, while the personal trust or person or partnership related to the personal trust owned the share, it was the share of a Canadian-controlled private corporation (CCPC), and more than 50% of the fair market value of the assets of that corporation:

  • was used mainly in an active business carried on primarily in Canada by the CCPC, or by a related corporation

  • was certain shares or debts of connected corporations

  • was a combination of the two

For the purpose of a qualified small business corporation share, a person or a partnership is related to a personal trust if it meets any of the following conditions:

• the person or partnership is a beneficiary of the personal trust

• the personal trust is a member of the partnership

• the person is a member of a partnership that is a member of another partnership and is deemed to be a member of the second partnership

• when the personal trust disposes of the shares, all the beneficiaries are related to the person from whom the personal trust acquired the shares

For more information, see "Qualified small business corporation shares"in Guide T4037, Capital Gains.

Qualified farm or fishing property of a personal trust includes any of the following property the personal trust owns:

• a share of the capital stock of a family farm or fishing corporation

• an interest in a family farm or fishing partnership

• real or immovable property, or a fishing vessel, or property included in Class 14.1 used in carrying on a farming or fishing business in Canada by either of the following:

  • an individual beneficiary (who is entitled to receive directly from the trust any income or capital of the trust), or that beneficiary's spouse or common-law partner, child, or parent

  • a family farm or fishing corporation, or a family farm or fishing partnership in which either an individual beneficiary, or the beneficiary's spouse or common-law partner, child, or parent own a share in the corporation or an interest in the partnership

  Note
  

  In addition, certain conditions must be met for property to be considered to have been used in the course of carrying on a farming or fishing business in Canada. For more information, see "Chapter 5 - Eligible Capital Expenditures"and "Chapter 7 - Capital Gains" in Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income.

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