CRA agreed that:
- where an individual shortly after commencing a proprietorship, transfers all of the assets used such active business to a newly-incorporated corporation in exchange for treasury shares of the corporation, the individual can benefit from the s. 110.6(2.1) deduction if the individual disposes of those shares, even if the disposition occurs within 24-months of having commenced the proprietorship, provided the other conditions are satisfied.
- whereas if the same individual had started his business through the corporation and disposed of the shares without having held them for a period of at least 24 months, he would not benefit from the s. 110.6(2.1) deduction.
In this regard, CRA stated:
[T[here is no mechanism in [the s. 110.6(14)(f)(ii)] relief rule that combines the period during which the business was operated as a sole proprietor with the period during which the shares of the corporation were held to ensure that this period is at least 24 months. Such a mechanism exists, for example, in the case of relief for shares issued as consideration for other shares or as consideration for the payment of a stock dividend. (See paragraph (e) of the definition of QSBCS.)