S. 98(5) requires that, within 3 months of a Canadian partnership ceasing to exist, one of the members (the “proprietor”) must carry on the business that was previously the business of the partnership.

CRA indicated that there was no requirement that the proprietor carry on the business throughout the 3-month period, so that the business could recommence at any time during that period, i.e., the phrase "within the 3 months" does not mean "throughout the 3 months."

However, whether the former partner carried on the former partnership business and continued to use, in the course of that business, the partnership property acquired on the winding-up, was a question of fact (e.g., there might be one business even if there was a hiatus during which it was not carried on).

Neal Armstrong. Summary of 2 December 2025 CTF Roundtable, Q.11 under s. 98(5).

Where a clean economy incentive claimant has claimed its tax credit at the “regular tax credit rate” (i.e., 10% higher than the (unenhanced) “reduced tax credit rate”) but is unable to substantiate having met the “Compensation Requirement” (respecting meeting (union-rate) prevailing wages) for covered workers employed by a third-party contractor, would CRA seek to apply the gross negligence penalty under s. 127.46(9)?

CRA indicated that the mere fact that a claimant is not able to demonstrate that covered workers employed by others met the Compensation Requirement would not, by itself, support the imposition of the penalty. However, to access the regular tax credit rate, a claimant who uses a contractor must be able to show that it took reasonable steps to ensure compliance with the Compensation Requirement. If no reasonable steps were taken, the claimant, by claiming at the regular rate, would run the risk of a determination that it, in circumstances amounting to gross negligence, failed to meet the prevailing-wage requirement.

Neal Armstrong. Summary of 2 December 2025 CTF Roundtable, Q.10 under s. 127.46(9).

To focus on the most informative scenario, an individual (“A”), who was a majority-interest beneficiary of a discretionary trust, thus was affiliated with the trust pursuant to s. 252.1(1)(g)(i). The trust held 80% of the common shares of Bco (which had only one class of shares) and A held the other 20%. A was the sole trustee.

Would A and the trust form an affiliated group of persons by which Bco was controlled such that Bco was affiliated with A pursuant to s. 251.1(1)(b)(ii)?

CRA (which indicated that it would restrict its remarks to matters of de jure control) noted that, pursuant to s. 251.1(4)(a), reference to a trust does not include a reference to the trustee. Accordingly, it was the trust alone that had de jure control of Bco, such that the trust and Bco were affiliated. Since Bco was controlled by a single person (the trust), in accordance with the Southside principle (which in this context had not been overridden by a provision like s. 256(1.2)(b)), it could not be said that Bco was controlled by a group of persons consisting of A and the trust.

This would suggest, for instance, that a sale by Bco to A would not be subject to the suspended loss rules.

Neal Armstrong. Summary of 2 December 2025 CTF Roundtable, Q.8 under s. 251.1(1)(b)(ii).

Where a US resident carries on, through a permanent establishment (PE) in Canada, a single business that consists of an activity resulting in income that is treaty-exempt, such as the cross-border transport by vehicle that is exempt under Art. VIII(4) of the Canada-US Treaty (the “Exempt Activity”), and an activity resulting in income that is not so exempt, e.g., intra-Canada transport (the “Taxable Activity”), that single business would fall within the Treaty-protected business definition (a business in respect of which “any income” of the taxpayer is exempt by treaty from Part I tax).

In 1999-0008185, CRA concluded that if the Taxable Activity for such a business produced a loss, such loss would not by virtue of ss. 115(1)(c) and 111(9) (prohibiting the deduction of losses from a treaty-protected business) be available to reduce profits from the Taxable Activity in another year.

When asked to comment, CRA indicated that the total business profits attributed to the Canadian PE must reflect what the PE would have been expected to earn if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions, dealing wholly at arm’s length with the US resident. Once such total profits were determined, they were required to be apportioned between the Exempt Activity under Art. VIII(4), and the Taxable Activity in accordance with arm’s length principles (in a consistent manner from year to year) so as to reasonably and accurately reflect the functions and risks associated with those respective activities. Provided that the taxpayer’s resulting allocation of revenue and expenses was appropriate, losses arising from the Taxable Activity could generally be deducted against profits from that same activity in accordance with s. 115(1)(c) and s. 111(9). This would allow the loss from the Taxable Activity to shelter future taxable profits from that same activity. No detailed technical explanation for this departure from 1999-0008185 was given.

Neal Armstrong. Summary of 2 December 2025 CTF Roundtable, Q.7 under s. 111(9).