Acquisition of control

Buyers of shares meet this term because buying a company can change who controls it. Under paragraph 251.2(2)(a), a corporation is subject to a loss restriction event when control of it is acquired by a person or group of persons. The CRA’s T2 guide explains line 063 of the return, which asks whether there has been an acquisition of control resulting in the application of subsection 249(4) since the start of the tax year.

Where the Act says control is not acquired

For the purposes of paragraph 251.2(2)(a) and other provisions it lists, subsection 256(7) deems control not to have been acquired solely because of certain share acquisitions. Examples include an acquisition from a person to whom the acquirer was related, an acquisition by a person already related to the corporation, and an estate acquiring shares because of a death. The CRA’s T2 guide also says there is no acquisition of control where shares go to an estate because of a death. The subsection has further conditions, so read it before relying on an example.

What follows

• A deemed year-end for the corporation
• Limits on non-capital losses from earlier years
• Questions for the seller about whether the exceptions apply, covered in buying shares of an incorporated company