A capital gain exemption is potentially available in s. 110.6 of the Income Tax Act (Canada) in respect of a capital gain realized on the disposition of a “qualified small business corporation share” (QSBC Share).  A two-year-holding period requirement for QSBC-Share treatment can be avoided if any of the exceptions in s. 110(14)(f)(i),(ii), or (iii) are met.  One of these exceptions applies if the QSBC Share was issued to a partnership as part of a transaction in which the partnership transferred to the corporation (in exchange for the shares) all or substantially all the assets used in an active business carried on by the partnership.  In Gillen v. The Queen, 2017 TCC 163, the parties intended to rely on this exception.  The Court found, however, that on December 7, 2007 the partnership acquired and then immediately sold to the corporation the beneficial ownership of its only assets, being certain potash-related rights (see paragraphs 90, 96, 99, 104, 109, 119, 123, and 124).  Accordingly, although the Court held that the partnership carried on an active business, it could not be said that the partnership had used the potash-related rights in that business (see paragraph 128).  The capital gain exemption – claimed in respect of the partnership’s subsequent sale of shares of the corporation in 2008 – was thus not available, as the two-year-holding period for the shares was not met.