Income Tax Act — I-3.3 110.62
Deduction for qualifying cooperative conversion — conditions 110.62 (1) Subsection (2) applies to an individual (other than a trust) if, at the time of a disposition (referred to in this section as the “disposition time”) of shares of the capital stock (referred to in this section as the “subject shares”) of a corporation (referred to in this section as the “subject corporation”) to another corporation (referred to in this section as the “purchaser corporation”) that occurred after 2023 and before 2027 under a qualifying cooperative conversion, the following conditions are met: (a) no individual has prior to the disposition time sought a deduction under this section or section 110.61 in respect of a disposition of shares that, at the time of that disposition, derived their value directly or indirectly, from an active business that is also relevant to the determination of whether the disposition of the subject shares satisfies the condition set out in paragraph (a) of the definition qualifying cooperative conversion in subsection 248(1); (b) throughout the 24 months immediately preceding the disposition time, (i) the subject shares were not owned by anyone other than the individual or a person or partnership related to the individual, except that if, at any time in the 24-month period immediately preceding the disposition time, the subject shares were substituted for other shares (in this paragraph referred to as the “substituted shares”), the subject shares shall be considered to have met the requirements of this subparagraph only where the substituted shares were not owned by any person or partnership other than a person or partnership described in this subparagraph throughout the period beginning 24 months before the disposition time and ending at the time of substitution, and (ii) more than 50% of the fair market value of the subject shares and the substituted shares, if any, was derived directly or indirectly from assets which were used principally in an active business; (c) immediately before the disposition time, (i) the subject corporation and each corporation affiliated with the subject corporation in which the subject corporation owns (directly or indirectly) shares is not a professional corporation, and (ii) the purchaser corporation is not established for the purposes of providing employment to its members who are its employees at that time (excluding any officer or director of the purchaser corporation) or the employees of another corporation controlled by the purchaser corporation; (d) at the disposition time, (i) the individual is at least 18 years of age, (ii) throughout any 24-month period ending before the disposition time, the individual, or a spouse or common-law partner of the individual, was actively engaged on a regular, continuous and substantial basis (including within the meaning of paragraph 120.4(1.1)(a)) in the activities of the business that is relevant to the determination of whether the subject shares satisfy the condition set out in paragraph (a) of the definition qualifying cooperative conversion in subsection 248(1), and (iii) the purchaser corporation is a worker cooperative, of which at least 75% of its (A) qualifying cooperative workers described in paragraph (d) of the definition worker cooperative in subsection 248(1) are resident in Canada, and (B) individual employee members described in paragraph (e) of the definition worker cooperative in subsection 248(1) are resident in Canada; and (e) the purchaser corporation, the individual and any other individual entitled to a deduction under subsection (2) in respect of the qualifying cooperative conversion (i) jointly elect, in prescribed form, for the deduction provided under subsection (2) to apply in respect of the disposition of the subject shares, (ii) include the following information in the election: (A) an amount (in this paragraph referred to as the “elected amount”) equal to the total amount of capital gains that the parties agree m