I have yet to find a definitive and detailed reply to the T2 Sch50 shares questions. I invested a lot of energy into this in my early years of T2 tax preparation especially with multiple voting and non-voting classes. One CRA resource officer on a call back finally told to use the following:
1 - List voting shares only.
2 - Use dollar value only.
3 - Total the number of all the classes of voting shares only. Did not specify common vs preferred. Did not know what to do about common vs preferred.
4 - Have the percentages add up to 100%. Please note that this differs from the T2 Schedule 50 instructions.
5 - Match these to the balance sheet and corporate records.
6 - This schedule is notional and rarely reviewed or audited for small, owner operated, private corporations.
7 - Create and maintain a shareholder continuity record in both the corporate record book and in the client documents based on book value unless advised otherwise by a corporate lawyer, CPA, or other subject matter expert.
In Alberta, this matches our Alberta Annual Return declaration. IE the form we complete when paying the Alberta Corporate Registry fee.
I feel your pain in not finding a definitive source and in receiving conflicting information. This seems to be yet one more area that needs updating and documenting by CRA and others.
These are the only two original source references that I found when searching the internet. Neither addressed this topic.
Income Tax Act.
Corporations Return Act.
In the 2019 edition of the Wolters Kluwer guide, Preparing Your Corporate Returns, section 8702, pages 613 to 614, infers that 10% or more shareholder of private corporations is based on the number of shares, both common and preferred, but poses the question about who are the top 10 shareholders:
“…For example, if there are 100 common shares and 100 preferred shares, and 10 shareholders each hold 10 of the commons, and 10 different shareholders each hold 10 of the preferreds, who are the top 10 shareholders? Do the common shareholders have more clout and are therefore the ones who should be listed?..”
This reference goes on to list some assumptions, pose some solutions, and refers to an earlier version of shares listing, pre 1997 which it discusses in section 2362.
They comment :
“It is difficult to determine precisely what information Schedule 50 is trying to pin down…”
And cover more situations including:
What if a shareholder owns both common and preferred shares.
Canadian tax residents vs non-residents.
Individuals vs corporations