CRA indicates that the 5 year work component of “excluded business” in the TOSI rules can be satisfied decades previously
Ms. B worked full time in the active business of Mr. A’s corporation (Opco) for 5 years, quit, and then 12 years later, married Mr. A and was issued shares by Opco. Whether dividends on her shares qualified for the excluded amount exception turned on whether the Opco business was an excluded business on the basis that she was “actively engaged on a regular, continuous and substantial basis in the activities of the [Opco] business … in … any five prior taxation years.” In finding that her having put in her 5-year stint many years ago while an arm’s length employee was no barrier to meeting this test, CRA stated:
[T]here is no requirement that the prior taxation years where the specified individual is actively engaged on a regular, continuous and substantial basis must be consecutive, nor is there a requirement that the specified individual must be related to the particular source individual at the time such qualifying activities are performed. … [and] these years can be before the effective date of the amendments to section 120.4.
Neal Armstrong. Summary of 27 February 2019 External T.I. 2018-0783741E5 under s. 120.4(1) – excluded business – para. (b).