A majority of the House of Commons has voted on third reading in
favour of private member's Bill C-208, An Act to amend the
Income Tax Act (transfer of small business or family farm or
fishing corporation), which aims to amend section 84.1 of the
Income Tax Act (Act). Currently and in very general terms,
when an individual sells shares of a corporation to a corporation
controlled by a family member, section 84.1 of the Act may result
in the proceeds from the sale being treated as a dividend, whereas
such proceeds would receive more favourable capital gains treatment
had the taxpayer sold these shares to an arm's-length party. If
adopted, Bill C-208, which passed third reading on May 12, 2021,
would limit the application of section 84.1 of the Act in cases of
intergenerational transfers of a business. The Senate must now vote
in favour of Bill C-208 for it to become law.
