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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
943010
XXXXXXXXXX A.M. Brake
Attention: XXXXXXXXXX
March 27, 1995
Dear Sirs:
Re: "Specified Investment Business", Subsection 125(7)
This is in reply to your letter of November 22, 1994 concerning the definition of "specified investment business" as contained in subsection 125(7) of the Act. You outlined a situation where a corporation ("Canco") with a June 30, year end had 6 full time employees for 5 full years, including all of the 1993 calendar year and up to May 30, 1994 when the number was reduced to 5 where it stood at the June 30, 1994 year end. In order that the Canco shares meet the test of being "qualified small business corporation" shares at December 31, 1993, Canco must have had more than 5 full time employees throughout the entire 1993-94 year ended June 30, 1994 as set out in subsection 125(7) of the Act. You feel that because there were 6 full time employees in the past and at the December 31, 1993 determination date, the requirement of more than 5 throughout the entire fiscal year gives an inappropriate result and asked whether the Department of Finance is aware of this problem.
In setting the number of full-time employees throughout the entire taxation year at more than 5, it seems, in our view, that this was a bare minimum. Certainly, there was no maximum and there was no alternative number of full and part-time or any combination thereof. While Canco did meet the minimum requirement in earlier years, it did not in its 1994 year. We suggest that there was no unintended result and that if it had been intended to require a number less than 6 full-time employees for the entire year, such as a combination of full and/or part-time employees for most of the year, the provision would have been so structured. You might note that the minimum requirement applies throughout the entire year and not merely at some particular time in the year.
We trust our comments will be of assistance to you.
Yours truly,
R. Albert
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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