The Saga of Bill C-208

Bill C-208 is a private member’s bill that became law on June 29, 2021, and addresses intergenerational transfers of small businesses and farms. Specifically, the Bill amends sections 84.1 and 55 of the ITA. The Bill allows the intergenerational transfer of specified family businesses to receive the tax treatment businesses sold to a third party receive. Bill C-208 changes the anti-avoidance rule which treats these transfers as a dividend rather than a capital gain to allow access to the lifetime capital gains exemption.

But on the very next day, the Feds indicated that they would legislate a delay of the Bill until 2022. The Department of Finance is now concerned that the Bill could lead to aggressive tax planning.

The widely held consensus is that the Bill is a wonderful development in the context of inter-generational transfers. It results in much more favorable tax treatment. But the sudden about-face leaves many wondering what the current status of the law is and what the future holds.

During this uncertain period, it would be wise to consult with your tax professional prior to a transfer contemplated by these rules.