Income Tax Act And Bill C-208

What is Bill C-208 and what does it attempt to accomplish?

On June 29th, 2021, Bill C-208 ("C-208") received royal assent and amended section 84.1 and section 55 of the Income Tax Act ("ITA"). The objective of C-208 was, ostensibly, to facilitate fairness in our taxation system – previously, certain intergenerational transfers of small businesses would result in the loss of the transferor's ability to claim the Lifetime Capital Gains Exemption ("LCGE"). The objective of C-208 is to facilitate bona fide intergenerational transfers of a business while preventing tax avoidance that undermines the equity of our tax system.¹ As a result of C-208, several anti-avoidance rules in the ITA were modified to provide specific exceptions that will facilitate the transfer of property between family members, to allow the transferor to claim the same benefits, or close to, that they would receive in an arm's-length sale.