[Boatload44]

I have a small business client (a CCPC) owned 96% by husband and 4% by wife. The husband passed away and, according to his Will, all of his shares pass to his wife. Under rollover rules there is no taxable disposition of husband's shares personally. Now wife owns 100% of shares. Do I have a change in comtrol, and thus a deemed year-end, or is there some exemption where such a rollover exists?

[dunner]

There's no change in control when ownership goes to a related person. You're related to your wife, dead or alive.

[Boatload44]

I appreciate the reply Dunner.

[dunner]

No problem. Change in control issues can be tricky.

[JohnV]

Actually, there is a subtle misuse of language here.

Though we commonly say "change in control", it is really about "acquisition of control" that is at the heart of the matter...

So, one could move from 100% to 50%, and though there is a "change in control" from 100% ownership to "no one owns it" , there is no "acquisition of control" because 50% does not give you that....

The "acquisition" wording then also covers situations where people, (related or unrelated) acting in concert, may each own significantly less than 50%, but collectivel "acquire control"

[dunner]

You're right, John, about the terminology. However, I believe CRA's position is that changing to 50/50 ownership (assuming unrelated people) does qualify as an "acquisition of control" since it is an acquisition of control by the group as opposed to a single person before. They issued a technical interpretation (#9900025) saying that they feel it is appropriate to presume that a group of 50/50 shareholders controls the corporation. However, they do go on to say that this could be refuted by showing that the decision-making process is effectively deadlocked.

[JohnV]

I think you're right if one had 100%, and as a result of the "acquisition", two new people have the shares.

If one person sell a 50% interest (I meant this by my example), then I do not believe there is an acquisition of control by the new party.....