CRA indicates that a transitional services agreement with an arm’s length purchaser can engage the TOSI rules

For TOSI purposes, an “excluded amount” includes (under (e)(i) of the definition) an amount, such as a dividend, that the individual does not derive directly or indirectly for the year from a “related business,” whose definition includes a business of the corporation in which the specified individual is actively (etc.) engaged. CRA indicated that this exclusion applied where the corporation in question (which presumably is paying dividends to a specified individual who was never relevantly engaged in its business) has in a previous year sold its business to an arm’s length corporation which continues to actively carry on that business – unless the source individual in question continues an active involvement in that business, for example, under a transitional services business, in which case the related business exception would not be available to the specified individual.

Neal Armstrong. Summary of 3 December 2019 CTF Roundtable, Q.9 under s. 120.4(1) – related business – (a)(ii).