28 February 1990 Ministerial Correspondence 59144 F - Qualifying Small Business Corporation

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 28, 1990

Dear Sirs:

Re:  Qualifying Small Business Corporation

This is in reply to your letter of November 23, 1989 in which you requested a technical interpretation to determine if a shareholder loan receivable is an asset used in active business in Canada.  You further requested our comments on the methods to be employed in the valuation of goodwill and if the Department would contest a valuation of goodwill by a Certified Business Valuator.

The situation outlined in your letter appears to involve an actual situation which should be the subject of a request for an advance income tax ruling.

However, it is the Department's position that a loan made by a corporation whose ordinary business activity does not include the lending of money, is not an asset used in an active business for the purposes of paragraph (b) of the definition of a small business corporation in subsection 248(1) of the Act and for the purposes of subparagraph (c)(i) of the definition of a qualified small business corporation share in subsection 110.6(1) of the Act.  It is also our view that it is necessary to establish the fair market value of all the corporate assets including goodwill.

The fair market value of goodwill or any other property may or may not coincide with the value determined by a Certified Business Valuator.

Yours truly,

for DirectorReorganizations and Non-Resident DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch