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.
REVENUE CANADA ROUND TABLE CTF NOV. 1992
Question # 71
SMALL BUSINESS CORPORATION
For purposes of the definition of a "qualified small business corporation share" in subparagraph 110.6(1)(c)(i), would (1) prepaid expenses related to the active business of the corporation or (2) land purchased for future development of a property to be used in an active business qualify as "assets used principally in an active business" ?
Answer
In our view, prepaid expenses could be considered as an asset used principally in an active business for purposes of subparagrah (c)(i) of the definition of "qualified small business corporation share" in subsection 110.6(1) of the Act, provided that the amount of the prepaid expenses is reasonable, having regard to all the circumstances, and incurred in the normal course of the business.
On the other hand, it is a question of fact whether or not land purchased for future development is used principally in an active business. As stated at the CTF 1990 Round Table, question 18, the Department is of the opinion that:
where land is acquired and a building is constructed for use in an active business that will be expanding or relocating to the new facility, and the new facility is in fact used in the active business within a reasonable period after completion and not for any other purpose, the land and building in question will be considered to have been used in an active business from the date of acquisition to the date of occupancy...
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