Can an individual, who has been a member for over 24 months of a partnership ("Partnership") that disposes of qualified small business corporation shares ("QSBCS") that have been held by it for over 24 months, benefit from the s. 110.6(2.1) deduction? What if the partner of the Partnership instead was a trust under which the individual was a beneficiary? CRA responded:
Paragraph 110.6(14)(d) provides that a partnership is deemed to be related to a person for any period throughout which that person was a member of the partnership. Consequently, it allows an individual who is a member of a Partnership that disposes of QSBCS to benefit from the capital gains deduction under subsection 110.6(2.1) since that member is deemed to be related to the partnership.
Respecting the trust beneficiary scenario, CRA stated, before concluding that “the Act allows a beneficiary of a trust, who is a member of a partnership that disposes of QSBCSs, to benefit from the capital gains deduction under subsection 110.6(2.1) if the capital gain is designated by virtue of subsection 104(21.2):
[G]enerally, subsection 104(2) provides that for the purposes of the Act “a trust shall … be deemed to be in respect of the trust property an individual… .” Since the term "individual" is defined in subsection 248(1) as a "person other than a corporation", it follows that a trust is not only an "individual" but also a "person" for all purposes of the Act. Consequently, we are of the view that a trust is also covered by paragraph 110.6(14)(d) when reference is made to a person.