Principal Issues: Where an eligible entity acquires assets comprising of an operating division from a non-arm's length corporation, are the remaining assets of the non-arm’s length corporation that were not used in operating the division required to be considered when ascertaining whether the acquired assets meet the all or substantially all requirement described in subparagraph 125.7(4.1)(b)(i) of the Act?
Position: Where the remaining assets were employed and risked in the non-arm's length corporation’s business such that their withdrawal would have a decidedly destabilizing effect on corporate operations, such assets must be considered when ascertaining whether the condition in subparagraph 125.7(4.1)(b)(i) is met.
Reasons: If a corporation is incorporated to earn income by doing business, there is a general presumption that profits arising from its activities are derived from a business.
