CRA declines to find that a CCPC with too many employees to have a specified investment business must have an active business

Following decisions such as Supreme Theatres that corporations with very little in the way of activity nonetheless qualified as carrying on an active business, s. 125 was amended to define “active business” to include any “business” other than a specified investment business or personal services business. CRA was essentially asked to confirm the proposition that a Canadian-controlled private corporation that employed six full-time employees in its rental operations (so that it thus did not carry on a specified investment business) will therefore qualify as carrying on an active business for purposes of s. 125(1) rather than being considered to earn income from property. CRA declined to give comfort on this point (stating that it was a question of fact) and not referring to any of the above history), but stated that the concept of “business” is “accorded an expanded meaning by subsection 248(1) by being defined in particular as including an undertaking of any kind whatever” (essentially, “activities” of any kind whatever in French).

Neal Armstrong. Summary of 5 October 2018 APFF Roundtable, Q.17 under s. 125(1) - “active business carried on by a corporation”.