asset

CCRA indicated that, for the purposes of the “qualified small business corporation share” and “small business corporation” definitions, is a future income tax asset (either presented on the balance sheet or still unrecognized) to be taken into account, noting that “the Act refers to the assets of a business and not to the assets shown on a corporation's balance sheet,” so that unrecognized future income tax assets should also be taken into account.

However, in finding that any such asset would not be considered to be used in a business, it stated:

A corporation in financial difficulty that no longer has any tangible property but has a balance of non-capital losses and undeducted scientific research and experimental development expenditures. Because of a debt settlement, s. 80(13) applies.

An individual holds the common shares of Holdco having an FMV of $1 million, and Holdco’s only asset is the common shares of Opco, also with an FMV of $1 million. $700,000 of Opco’s assets are used principally in its active business carried on primarily in Canada and $300,000 are excess cash. Stopping there, the para. (d) rule in the qualified small business corporation share (QSBCS) definition would not be engaged because 100% of Holdco’s assets were qualified assets, being shares of Opco which satisfied the 50% asset test in para. (b).