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.
5-950413
XXXXXXXXXXJ. Teixeira
(613) 957-2095
Attention: XXXXXXXXXX
July 17, 1995
Dear Sirs:
Re: Specified Investment Business
This is in reply to your letter of February 7, 1995, in which you requested our comments on whether a corporation that carries on a business involving indoor tennis courts and has a weight/exercise room, as part of its facilities, carries on an active business or a specified investment business.
The situation outlined in your letter appears to relate to an actual situation with identifiable taxpayers; therefore, confirmation of the tax implications of such a situation is only given in reply to an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R2. Where the particular situation relates to transactions that have been completed, the enquiry should be directed to the local tax services office where the taxpayer files its returns. While we are unable to comment on the particular situation described in your letter, the following general comments may be of assistance to you.
Whether an active business is carried on is essentially a question of fact. The Department's position regarding income from an active business, a specified investment business and a personal services business is provided in Interpretation Bulletin IT-73R4. "Active Business" is defined in subsections 125(7) and 248(1) of the Income Tax Act (the "Act"), to mean any business carried on other than a specified investment business or a personal services business.
A "specified investment business" is defined in subsection 125(7) of the Act, to mean a business the principal purpose of which is to derive income from property unless the conditions in subparagraph (a) or (b) in the definition are satisfied. As stated in paragraph 11 of IT-73R4, "principal purpose" is not a defined term in the Act for the purposes of a specified investment business, but it is considered to be the main or chief objective for which the business is carried on. In the case of a corporation which carries on a business involving indoor tennis courts and has a weight/exercise room the extent of the services it provides (e.g. availability of tennis and exercise instructors or professionals, organization of activities, availability of changerooms and lounge) would be a significant factor in determining whether it is carrying on an active business or a specified investment business. It is our opinion that where the use of the tennis courts and weight/exercise room and all other services are available to members in consideration for membership fees and per use charges, the corporation would generally be considered to be carrying on an active business.
The foregoing comments are not rulings and, in accordance with the practice referred to in Information Circular 70-6R2 dated September 28, 1990, are not binding on Revenue Canada.
Yours truly,
for Director
Reorganization and Foreign Division
Income Tax Rulings and Interpretations
Directorate
Policy and Legislation Branch
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