Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
February 9, 1989
XXXX
B. Dwyer (613)957-2744
Re: Paragraph (c) of the Definition "Qualified Small Business Corporation Share" in Subsection 110.6(1) of the Income Tax Act (Canada) (the "Act")
This is in reply to your letter dated January 23, 1989. In that letter, you requested our opinion on whether the reference in the above-noted provision of the Act to "assets used in an active business" includes a reference to the goodwill of a business.
When determining whether a share meets the requirements of the above-noted paragraph of the Act, one must consider the fair market value of all the assets of the corporation. This applies to both tangible and intangible assets, regardless of whether the asset has been recorded on the corporate balance sheet. In our opinion, this includes the fair market value of goodwill used in an active business, whether or not that goodwill has been purchased.
The above considerations also apply in determining whether a corporation is a "small business corporation" for the purpose of paragraph (a) of the "qualified small business corporation share" definition. A "small business corporation" is defined in subsection 248(1) of the Act.
Whether an asset is used in an active business is a question of fact that requires consideration of all the circumstances of the situation.
The comments set out in this letter are of a purely general nature and do not take into account considerations that might arise in the context of a specific transaction. In accordance with paragraph 24 of Information Circular 70-6R, the comments expressed herein do not constitute advance income tax rulings and consequently are not binding on the Department.
Yours truly,
for Director Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1989
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© Sa Majesté la Reine du Chef du Canada, 1989
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