Mr. X acquired the shares of Holdco (holding only the shares of Opco) on January 1, 2010 and, on September 1, 2011, he transferred his Holdco shares to Opco in exchange for Class D Opco shares. Over 50% the fair market value ("FMV") of Opco was attributable to the elements referred to in s. 110.6(1)(c)(i) of the QSBCS definition between those two dates.
On January 2, 2012, he disposed of his Class D shares at which time more than 90% of Opco's FMV was attributable to such elements. Is it sufficient for the Holdco shares to have satisfied the criteria of ss. 110.6(1)(b) and (c) of the QSBCS definition for the period beginning 24 months before the particular time (January 2, 2012) and ending at the time of replacement (September 1, 2011)? CRA responded:
[I]n the event that Opco's Class D Shares otherwise satisfy the conditions of the QSBCS definition and subparagraph 110.6(14)(f)(i) applies, we are of the view that they may qualify as QSBCS if, throughout the 24-month period beginning before January 2, 2012 and ending on September 1, 2011, the original or replacement shares, being the shares of Holdco, satisfy the tests prescribed in subparagraphs 110.6(1)(e)(i) and (ii), which describe the conditions set out in paragraphs 110.6(1)(b) and (c) of the definition.