Cases
Hudon v. Canada, 2001 DTC 5630, 2001 FCA 320
In the years in question a corporation ("Hall River") which owned forest concessions and rights to develop the hydro electric potential of a river...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Business | framework negotiations were engaging in a business | 95 |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Small Business Corporation | 129 |
See Also
Durocher v. The Queen, 2016 DTC 1013 [at 2584], 2015 TCC 297, aff'd 2016 CFA 299
A financial institution, which was controlled by a non-resident, acquired an option to subscribe at a future date for the majority of the equity...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 125 - Subsection 125(7) - Canadian-Controlled Private Corporation | potential illegality of an option to acquire control of a private corporation did not nullify the option, so that the corporation was not a CCPC | 447 |
| Tax Topics - General Concepts - Illegality | potential illegality of an option to acquire control of a private corporation did not nullify the option, so that the corporation was not a CCPC | 171 |
Pellerin v. The Queen, 2015 TCC 130 (Informal Procedure)
The taxpayer (Mika), who was born on March 8, 2007, received a distribution of shares qua beneficiary of a Quebec family trust (and personal...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(14) - Paragraph 110.6(14)(b) | fetus retroactively deemed to be beneficiary on birth | 75 |
Twomey v. The Queen, 2012 DTC 1255 [at 3739], 2012 TCC 310
In 2005, the taxpayer sold 78 of his 100 common shares of an Ontario corporation ("115") to the other shareholder ("D.K."), and claimed the...
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| Tax Topics - General Concepts - Effective Date | subsequent share issuance to give effect to shareholders' intent "gave effect to the true facts" | 282 |
Administrative Policy
20 February 2018 External T.I. 2017-0727811E5 F - Synthetic disposition
10 months after the formation by him of a small business corporation, A agrees with an arm’s length employee of the corporation to sell 1/3 of...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Synthetic disposition arrangement | an arrangement which eliminates all risk of loss nonetheless “appears” not to be a synthetic disposition arrangement if there is 20% profits participation | 264 |
7 October 2016 APFF Roundtable Q. 9, 2016-0652921C6 F - Résidence - actif utilisé / Residence - asset used
Mr. A holds all the shares of Corporation A, which carries on a farming business operated by Mr. A (but not as employee). Corporation A holds the...
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|---|---|---|
| Tax Topics - Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(1) - Share of the Capital Stock of a Family Farm or Fishing Corporation | primary employee use qualifies farm house | 69 |
7 October 2016 APFF Roundtable Q. 11, 2016-0652941C6 F - Contrat de location / Capital lease
Although CRA considers it to be irrelevant whether, under GAAP, a lease is capitalized by a lessee as a capital lease, it considered that the...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Small Business Corporation | FMV of rights under a lease must be included | 144 |
17 July 2013 External T.I. 2012-0473261E5 F - Actif d'impôts futurs / Future income tax assets
Is a future income tax asset an asset that is used principally in an active business carried on in Canada for purposes of the "qualified small...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Small Business Corporation | tax receivable arising from carryback of NCL is active business asset cf. future tax asset | 190 |
11 October 2013 APFF Roundtable, 2013-0495631C6 F - Actions admissibles de petites entreprises
Mr. X holds all the common shares of Holdco, whose only asset is shares of Opco with a fmv of $1M. Opco's has $1.5M of cash, $3.5M of active...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Small Business Corporation | 90% is generally a safe harbour, and in a particular context CRA may accept lower than 90% | 138 |
7 October 2013 External T.I. 2013-0500941E5 F - Actif utilisé dans une entreprise active
A corporation carrying on an active business has a 9.9% interest in a general partnership (an SENC), whose sole property is a rental builiding...
10 May 2013 External T.I. 2012-0449651E5 F - SENC - revenu d'entreprise exploitée activement
Holdco holds (as its only assets) a 99% limited partner interest in a limited partnership (LP), and the general partner (Quebec Inc.) holds a 1%...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 129 - Subsection 129(6) | Norco followed | 39 |
9 June 2005 External T.I. 2004-0092001E5 F - Droits indivis dans les actions
As the result of the winding up of a partnership that held shares of a small business corporation, one of the former partners has held undivided...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Share | undivided interests in QSBC shares qualify as shares | 97 |
10 October 2003 Roundtable, 2003-0030045 F - AAPE-LIQUIDITE DETENUE MOMENTANCEMENT
In order that the vendors of a corporation may receive repayment of amounts owing to them, one day before the sale of their shares the purchaser...
7 March 2002 External T.I. 2001-0091785 - ACTIVE BUSINESS ASSETS - CASH
in finding that cash accumulated to pay annual bonuses to the shareholder-managers was used in the corporation's active business and generated...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 125 - Subsection 125(7) - Income of the Corporation for the Year From an Active Business | cash accumulated to pay bonuses was active asset | 384 |
4 July 1997 Technical Interpretation 5-9636
A residual interest (as defined in s. 98.1) is an asset used principally in an active business carried on primarily in Canada by the partner if...
9 September 1996 External T.I. 9619985 - LAND INVENTORY - ACTIVE BUSINESS ASSET
Where the only significant asset of a corporation was a large development property in the planning stages of development, RC questions whether the...
13 October 1994 External T.I. 9416755 - ACTIVE BUSINESS ASSETS - INSURANCE PROCEEDS
"Where ... a corporation has significant short term cash reserves as a result of receiving insurance proceeds and the corporation immediately uses...
21 October 1994 External T.I. 9422195 - CAPITAL GAINS EXEMPTION
"A seasonal temporary closure of operations of a business done on a recurring basis, does imply that an active business has, notwithstanding such...
12 April 1994 T.I. (C.T.O. "Active Assets")
Whether an investment in shares qualifies as an asset used principally in an active business turns on whether such asset is used principally in...
12 April 1994 External T.I. 9402365 - ACTIVE ASSETS- CASH
List of seven factual guidelines that may be applied to determine whether cash held by a corporation is used in its active business.
28 June 1994 External T.I. 9330615 - DEFINITION OF QSBCS
Where the fair market value of the assets of a corporation ("Parentco 1") comprise active business assets (40%), shares of one subsidiary (12%),...
5 May 1994 External T.I. 9330275 - USE OF A BUILDING IN AN ACTIVE BUSINESS
Where two unrelated corporations each have a 1/2 undivided interest in a building and each use 1/2 of the building as their business premises,...
14 February 1994 External T.I. 9330405 F - Capital Gains Exemption
The position in IT-268R3, that a residence owned by a corporation will be regarded as used in the business of farming if more than 50% of its use...
9 August 1994 External T.I. 9333125 - CAPITAL GAINS EXEMPTION
The respective corporations of a husband and wife together hold 100% and 40%, respectively, of Opco 1 and Opco 2 "through" a general partnership...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 251 - Subsection 251(2) - Paragraph 251(2)(c) - Subparagraph 251(2)(c)(i) | 164 |
1994 A.P.F.F. Round Table, Q. 35
Favourable analysis of a purification transaction in which a subsidiary whose shares represent 30% of the fair market value of the assets of a...
93 C.R. - Q. 58
RC considers that a corporate limited partner uses its proportionate share of each asset of the limited partnership for purposes of the definition...
9 February 1993 T.I. (Tax Window, No. 29, p. 3 ¶2436)
Unless a corporation's business includes the lending of money, a loan receivable from the son of a controlling shareholder will not qualify as an...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Small Business Corporation | 101 |
13 January 1993 T.I. 923260 (November 1993 Access Letter, p. 504, ¶C109-156)
Where a corporation owned by an individual ("Holdco") sold its shares of Opco to Newco, a newly-incorporated corporation owned by the same...
2 December 1992 T.I. (Tax Window, No. 27, p. 22. ¶2320)
Refundable deposits paid under the Pits and Quarries Control Act are assets used in the active business of a pit operator.
7 December 1992 T.I. (Tax Window, No. 27, p. 18, ¶2326)
Where a private corporation goes public and a shareholder receives shares of the public corporation under the rollover in s. 86, the status of...
92 C.R. - Q.54
Prepaid expenses relating to an active business of the corporation could be considered as an asset used principally in an active business provided...
92 C.R. - Q.24
Transactions whereby a stock dividend is issued to the sole shareholder of a corporation who transfers the stock dividend shares to Newco,...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | 50 |
28 July 1992 T.I. (Tax Window, No. 21, p. 7, ¶2054)
Where an individual controls a corporation (Holdco) which in turn controls another corporation (Opco), indebtedness of Holdco owing to Opco will...
29 July 1992 External T.I. 5-921123
Discussion of the application of the requirement for ownership for 24 months by none other than the individual or a person or partnership related...
25 August 1992 External T.I. 5-920191
Re whether cash and term deposits qualify as assets used primarily in an active business.
23 June 1992 T.I. (April 1993 Access Letter, p. 146, ¶C109-128)
Paragraph (d) of the definition can have no application where there are only two corporations and one of the corporations (Holdco) has, as its...
1992 A.P.F.F. Annual Conference, Q. 9 (January - February 1993 Access Letter, p. 53)
Where Opco pays a dividend in kind with the appropriate amount to two Holdcos, each owing 50% of its shares, who then, by mutual agreement,...
10 January 1992 Memorandum (Tax Window, No. 17, p. 13, ¶1773)
A building only 40% of which is used in an active business is not an asset used principally in an active business.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(8) | 93 |
25 March 1992 T.I. (Tax Window, No. 18, p. 14, ¶1828)
Amounts put in trust by clients of a funeral home corporation are not assets of the corporation for purposes of determining whether it is a small...
19 March 1992 T.I. (Tax Window, No. 18, p. 5, ¶1823)
Where an individual acquires shares from her husband before their divorce (at which time their shares have been held by him for more than 24...
11 February 1992 T.I. (Tax Window, No. 16, p. 18, ¶1743)
The rental of a fishing licence would not necessarily preclude that asset from being considered to be used in an active business.
91 C.R. - Q.13
Re meaning of "primarily".
91 C.R. - Q.14
Where the sole asset of a Canadian-controlled private corporation is a 50% interest in a partnership 60% of whose assets are used in an active...
24 January 1992 T.I. (Tax Window, No. 12, p. 11, ¶1575)
Four numerical examples illustrating the application of the "all or substantially all" test in paragraph (d).
7 and 29 October 1991 T.I. (Tax Window, No. 10, p. 1, ¶1504)
In order for a loan owing to a corporation to be a qualifying asset for purposes of s.(c)(ii) it must be issued by a subsidiary rather than a...
16 September 1991 TI (Tax Window, No. 9, p. 9, ¶1451)
The extended meaning of "control" in s. 186(2) may also apply in determining whether corporations are connected for purposes of the definition of...
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|---|---|---|
| Tax Topics - General Concepts - Effective Date | 34 | |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Small Business Corporation | 25 |
4 June 1991 Memorandum (Tax Window, No. 4, p. 22, ¶1276)
A shelf company will be treated as newly-incorporated at the time it is transferred by the lawyer to the taxpayer, provided that prior to the...
15 May 1991 T.I. (Tax Window, No. 6, p. 2, ¶1357)
Where the shares of Parentco are owned by related persons, its subsidiary will be deemed for purposes of Part IV and the definition of a qualified...
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|---|---|---|
| Tax Topics - Income Tax Act - Section 186 - Subsection 186(2) | 35 |
24 April 1991 T.I. (Tax Window, No. 2, p. 12, ¶1211)
A corporation which meets the other tests will be a qualified small business corporation if 51% of its directly held assets are active business...
12 April 1991 T.I. (Tax Window, No. 2, p. 5, ¶1187)
Mortgages held by a developer which were the consideration for sales of its land inventory would not qualify as being used in an active business...
24 January 1991 T.I. (Tax Window, Prelim. No. 3, p. 7, ¶1106)
Discussion of the loss of the exemption as a result of the transfer of shares to a holding company controlled by unrelated individuals.
23 October 1990 T.I. (Tax Window, Prelim. No. 1, p. 21, ¶1026)
The business of a corporation may be considered to have commenced when essential preliminaries to the carrying on of that business in an active...
1 October 1990 T.I. (Tax Window, Prelim. No. 1, p. 15, ¶1034)
Where the sole asset of a corporation was land leased by it to its sole individual shareholder for use in his active business, such use will not...
90 C.R. - Q18
Where land is acquired and a building is constructed for use in an active business which will be expanding or relocating to the new facility, and...
19 March 1990 T.I. (August 1990 Access Letter, ¶1378)
Where a franchisee corporation has a substantial investment in special shares and notes of the franchisor, such shares and notes would be...
8 March 1990 T.I. (August 1990 Access Letter, ¶1379)
Property is used in an active business if it is used principally with respect to that business and put to risk in the venture. However, engaging...
8 March 1990 T.I. (August 1990 Access Letter, ¶1379)
A corporation doing business in the real estate development field and which holds some parcels of inventory which have not yet been developed will...
2 March 1990 T.I. (August 1990 Access Letter, ¶1376)
If within 24 months of the determination time, the corporation in question had transferred 60% of its active business assets to a wholly-owned...
27 February 1990 T.I. (July 1990 Access Letter, ¶1326)
A stock split which does not increase the appropriate stated capital account is not considered to result in new shares being issued for purposes...
26 February 1990 T.I. (July 1990 Access Letter, ¶1327)
Shares of a public corporation which supplies products to the CCPC in question ("Opco") will qualify as assets used in the active business of Opco...
20 February 1990 T.I. (July 1990 Access Letter, ¶1325)
Where Holdco has an intercompany receivable owing to it from its wholly-owned subsidiary, Opco, and such intercompany receivable represents more...
19 February 1990 T.I. (July 1990 Access Letter, ¶1325)
Where XYZ holds all the shares of A, more than 50% of the assets of A consists of advances to XYZ, the balance of such assets being used in an...
18 January 1990 T.I. (June 1990 Access Letter, ¶1273)
A corporation which holds real estate inventory which had been acquired to be resold, although no sale had occurred over the past five years, is...
13 December 1989 T.I. (May 1990 Access Letter, ¶1227)
The expanded concept of control set out in s. 186(2) applies for purposes of the connected corporation test contained in the definition of...
15 November 89 T.I. (April 90 Access Letter, ¶1179)
The 24-month test will not be met where the taxpayer acquired the shares from her husband less than 24 months before the determination time, and...
19 September 89 T.I. (February 1990 Access Letter, ¶1119)
Where Holdco holds a loan receivable from a related corporation which is not connected ("Opco"), the loan receivable will not be an asset used in...
89 C.R. - Q.11
RC is presently reviewing whether its position in IT-486R, that an asset is used in a business if more than 50% of its use is in respect of that...
October 1989 Revenue Canada Round Table - Q.12 (Jan. 90 Access Letter, ¶1075)
Proceeds of an insurance policy can taint a corporation even where the proceeds were distributed shortly after their reception by the corporation....
88 C.R. - "Small Business Corporation Shares" - "Background"
The exception in paragraph (d) is designed to preclude circumvention of the 50 percent test by stacking of holding companies."
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(1) - Qualified Small Business Corporation Share | 19 |
88 C.R. - F.Q.33
The receipt of life insurance proceeds by a corporation upon the death of a shareholder can breach the 50% test even if the proceeds are paid out...
88 C.R. - "Small Business Corporation Shares" - "Background"
The exception in paragraph (d) is designed to preclude circumvention of the 50 percent test by stacking of holding companies."
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(1) - Qualified Small Business Corporation Share | 19 |
88 C.R. - F.Q. 35
The fair market value of an asset is determined without regard to a mortgage debt on the asset.
Articles
Mallin, "Organizing and Reorganizing to Ensure 'Qualified Small Business Corporation Share' Status", 1990 Canadian Tax Journal, pp. 745, 1026.
Truster, "The Capital Gains Exemption", 1989 Conference Report, c. 12.
Paragraph (b)
Administrative Policy
7 October 2011 Roundtable, 2011-0411831C6 F - Définition du mot mois
On February 5, 2009, Mr. X acquired all the shares of Opco A (at all relevant times, a small business corporation) from an unrelated individual,...
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|---|---|---|
| Tax Topics - Statutory Interpretation - Interpretation Act - Section 35 | 24-month period preceding time on Date X interpreted as extending back 24 months from the day before Date X | 111 |
Paragraph (c)
Administrative Policy
22 April 2003 External T.I. 2002-0169565 F - ACTIF UTILISE DANS L'ENTREPRISE
A corporation (i) carrying on a processing business has tax credits receivable respecting its SR&ED expenditures for the year or Quebec refundable...
5 February 2003 External T.I. 2002-0157445 F - AAPE ACTION ADM PETITE ENTREPRISE
CCRA considered it to be a question of fact whether shares of a corporation engaged in a business of trading listed shares were QSBCs.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Small Business Corporation | CCRA articulation of Ensite test in relation to stock-trading business | 136 |
Subparagraph (c)(i)
Administrative Policy
11 October 2013 Roundtable, 2013-0499671C6 F - Actif d'impôts futurs / Future income tax assets
Is a future income tax asset an asset used in an active business for the purposes of the definition of QSBC definition? CRA responded (reversing...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Small Business Corporation | future income tax asset is not an asset – tax receivable is, but is an active business asset if it arose from active business | 177 |
12 February 2008 External T.I. 2006-0217301E5 F - Actions admissibles de petite entreprise
In indicating that property held by a trust of which a corporation is the sole beneficiary is not considered assets of the corporation for the...
20 July 2004 External T.I. 2004-0062031E5 F - Actif utilisé dans entreprise exploitée activement
A corporation owned a large area of vacant land in Canada (for instance, in an industrial park) and, as the corporation wished to locate in the...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Business | an adventure is not “carried on” if there is insufficient activity | 225 |
| Tax Topics - Income Tax Act - Section 125 - Subsection 125(7) - Active Business Carried On by a Corporation | an adventure is a business for s. 125(1) (but not 110.6) purposes even if it is not carried on | 148 |
Paragraph (d)
Administrative Policy
2 November 2023 APFF Roundtable Q. 3, 2023-0984441C6 F - Qualified small business corporation share - meaning of "all or substantially all" and "asset"
An individual holds the common shares of Holdco having an FMV of $1 million, and Holdco’s only asset is the common shares of Opco, also with an...
Paragraph (e)
Administrative Policy
4 January 2022 External T.I. 2015-0607531E5 F - Action admissible de petite entreprise
- On January 1, Year 1, Mr. X (and Mr. Y) exchanged their 10 (and 90) common shares of Opco for 100 (and 900) preferred shares of Opco.
- They also...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(14) - Paragraph 110.6(14)(f) - Subparagraph 110.6(14)(f)(i) | s. 110.6(14)(f)(i) can apply to an amalgamation | 327 |
23 February 2012 External T.I. 2011-0421821E5 F - Test à l'alinéa 110.6(1)e) de la définition d'AAPE
Mr. X acquired the shares of Holdco (holding only the shares of Opco) on January 1, 2010 and, on September 1, 2011, he transferred his Holdco...
18 October 2004 External T.I. 2004-0077151E5 F - Déduction pour gain en capital
In connection with indicating that, where an individual shortly after commencing a proprietorship, transfers all of the assets used such active...
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(14) - Paragraph 110.6(14)(f) - Subparagraph 110.6(14)(f)(ii) | no requirement for the combined period of holding to be 24 months | 204 |
Subparagraph (e)(ii)
Administrative Policy
8 November 2005 External T.I. 2005-0117791E5 F - Exonération des gains en capital
Mr. X, who held the common shares of Holdco which, in turn, held all the shares of Opco which, during the last 24 months satisfied the description...