Income Tax Regulations — 5103
5103 (1) For the purposes of this Part and subsection 259(5) of the Act, a trust is a small business investment trust at any particular time if at all times after it was created and before the particular time (a) it was resident in Canada; (b) the interests of the beneficiaries under the trust were described by reference to units of the trust that were identical in all respects; and (c) no beneficiary or group of beneficiaries who did not deal with each other at arm’s length held more than 30 per cent of the units of the trust and, for the purposes of this paragraph, a small business investment corporation that has not borrowed money and in which no shareholder or group of shareholders who did not deal with each other at arm’s length held more than 30 per cent of the outstanding shares of any class of voting stock shall be deemed not to be a beneficiary; (d) its only undertaking was the investing of its funds and its investments consisted solely of (i) small business securities where, except as provided in subsection 5104(1), the trust was the first person (other than a broker or dealer in securities) to have acquired the securities and it has owned the securities continuously since they were so acquired, (ii) property (other than a small business security) that is (A) a share of the capital stock of a corporation (other than a share that is issued to the trust and that is either a share described in section 66.3 of the Act or a share in respect of which an amount has been designated under subsection 192(4) of the Act), or (B) a put, call, warrant or other right to acquire or sell a share described by clause (A), (iii) specified properties, or (iv) any combination of properties described in any of subparagraphs (i) to (iii); (e) it has complied with subsection (2); (f) it has not borrowed money except for the purpose of earning income from its investments and the amount of any such borrowings at any time did not exceed 20 per cent of the trust capital at that time; and (g) it has not accepted deposits. (2) The aggregate of the cost amounts to a small business investment trust of small business securities held by it at any time shall not be less than the amount, if any, by which the aggregate of (a) 25 per cent of the amount, if any, by which (i) the aggregate of all amounts received by it more than 12 months before that time and not more than 24 months before that time as consideration for the issue of its units or in respect of its units exceeds (ii) the aggregate of all amounts paid by it before that time to its beneficiaries and designated by the trust as a return of the consideration referred to in subparagraph (i), (b) 50 per cent of the amount, if any, by which (i) the aggregate of all amounts received by it more than 24 months before that time and not more than 36 months before that time as consideration for the issue of its units or in respect of its units exceeds (ii) the aggregate of all amounts paid by it before that time to its beneficiaries and designated by the trust as a return of the consideration referred to in subparagraph (i), and (c) 75 per cent of the amount, if any, by which (i) the aggregate of all amounts received by it more than 36 months before that time as consideration for the issue of its units or in respect of its units exceeds (ii) the aggregate of all amounts paid by it before that time to its beneficiaries and designated by the trust as a return of the consideration referred to in subparagraph (i) exceeds 75 per cent of the amount, if any, by which the aggregate of its losses from the disposition of properties disposed of before that time exceeds the aggregate of its gains from the disposition of properties disposed of before that time. (3) For the purposes of subsection (2), where a small business investment trust disposes of a small business security it shall be deemed to continue to hold the investment for a period of 90 days following the date of disposition. [NOTE: Application provisions a