CRA auditors may apply a low threshold for determining whether there is a business for TOSI purposes

Paul Wilson (Director, Medium Business Audit Division, Small and Medium Enterprises Directorate), in discussing the audit approach to the new tax on split income (TOSI) rules, provided comments on inter alia the scenario where a $5 million investment portfolio (held by a corporation owned equally by four mature shareholders who are siblings) is professionally managed by a third party investment manager and earns a large dividend return, with the shareholders meeting with the investment manager once a quarter to review the investment strategy and also meeting once a year to determine the annual dividend.

He indicated that given that the courts have indicated a very low threshold for when a corporation has a business, the corporation would likely be considered to have a business for TOSI purposes. However, he conceded that if the corporation only held GICs, it would be considered to earn income from property, so that the TOSI rules could not apply.

Neal Armstrong. Summary of 2 December 2019 CTF Conference - Paul Wilson in "New Taxation Rules for Private Corporations: So far, so reasonable?" under “Scenario 2” under s. 120.4(1) – related business.