Which of the following conditions is NOT required for shares of a Canadian-controlled private corporation (CCPC) to qualify as 'Qualified Small Business Corporation Shares' for the purpose of the Lifetime Capital Gains Exemption?

Question: Which of the following conditions is NOT required for shares of a Canadian-controlled private corporation (CCPC) to qualify as 'Qualified Small Business Corporation Shares' for the purpose of the Lifetime Capital Gains Exemption?

Answer options:

• At the time of sale, more than 50% of the fair market value of the corporation's assets must be used in an active business carried on primarily in Canada.
• Throughout the 24 months immediately before the sale, the shares must have been owned by the individual claiming the exemption or a person related to them.
• Throughout the 24 months immediately before the sale, more than 50% of the fair market value of the corporation's assets must have been used in an active business carried on primarily in Canada. ✅ At no time during the 24 months immediately preceding the sale can more than 10% of the corporation's assets be considered 'excluded property' such as non-business assets.

Correct answer: At no time during the 24 months immediately preceding the sale can more than 10% of the corporation's assets be considered 'excluded property' such as non-business assets.

Explanation: The 'more than 10% excluded property' rule is not a standalone condition for QSBC shares but rather relates to the 'more than 90% active business asset' test at the time of sale, and the 'more than 50% active business asset' test for the 24 months prior to sale, effectively defining what active business assets are. The 'more than 90% active business assets' test is for the date of disposition, not 10%.