Specified shareholder
A specified shareholder is a defined term in subsection 248(1) of the Income Tax Act. It means a taxpayer who owns, directly or indirectly, at any time in the year, not less than the minimum proportion set in the definition of the issued shares of any class of a corporation or of a related corporation.
The label applies to taxpayers who meet a share-ownership test. The CRA’s folio on shareholder loans and debts summarizes the test in general terms. See also the shareholder loan entry and repaying shareholder loans when you sell.
How the definition works
The test looks at issued shares of any class, in the corporation or in a related corporation. A taxpayer is deemed to own shares owned by a person with whom the taxpayer does not deal at arm’s length. A beneficiary of a trust, and a member of a partnership, is deemed to own a proportion of the shares the trust or partnership holds; where a beneficiary’s share depends on a discretionary power, paragraph (e) deems the beneficiary to own all the trust’s shares. Paragraph (d) deems some individuals who perform services for a corporation that would be carrying on a personal services business to be specified shareholders.
What to check or ask
- Who owns the shares, directly or through a trust, partnership or family members
- Whether there is more than one class, since the test applies to any class
- Which definition a provision uses, since some use their own, such as subsection 18(5), or read this one differently, such as subsection 55(3.3)
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Government of CanadaGovernmentIncome Tax Act, R.S.C. 1985, c. 1 (5th Supp.)
- 02Canada Revenue AgencyGovernmentIncome Tax Folio S3-F1-C1, Shareholder Loans and Debts
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