3 August 1995 Ruling 9519093 - PERSONAL SERVICES BUSINESS

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.

Principal Issues:

Whether corporation is carrying on a personal services business. i.e., whether the incorporated employee, XXXXXXXXXX could reasonably considered to be an employee of his present employer, XXXXXXXXXX if the XXXXXXXXXX did not exist.

Position TAKEN:

Refused to rule because it would be a determination of fact as to whether the functions set out in the proposed agreement between the
XXXXXXXXXX

Reasons FOR POSITION TAKEN:

Not a matter upon which we can rule. Also, advised

XXXXXXXXXX

		951909
XXXXXXXXXX	A.M. Brake

Attention: XXXXXXXXXX

August 3, 1995

Dear Sirs:

Re: XXXXXXXXXX
Advance Income Tax Ruling Request

This is in reply to your undated letter requesting an advance income tax ruling on behalf of the above-noted taxpayers concerning whether the Corporation will be considered to carry on a personal services business as that term is defined in subsection 125(7) of the Income Tax Act (the "Act").

XXXXXXXXXX

Since the matter upon which you have asked us to rule is a determination of fact to be made based on all of the relevant facts relating to the situation, the gathering of which would be the subject of an audit, we are unable to provide the requested ruling. We will, however, provide our comments.

Our Comments

An `active business carried on by a corporation' means any business carried on by a corporation other than a specified investment business or a personal services business. Whether or not a particular corporation is a personal services business is a question of fact to be determined from an examination of all the facts. However, the Act provides that a corporation is considered to carry on a personal services business if among other factors an individual performs services on behalf of the corporation (the "incorporated employee") and the incorporated employee or a person related thereto owns 10% or more of the shares of the corporation and the incorporated employee would otherwise, but for the existence of the corporation, reasonably be regarded as an employee or officer of the person who received the services from the corporation. (There are some exceptions for corporations employing throughout the year more than five full time employees and for situations where the services are provided to associated corporations).

In this particular situation, the key issue to be resolved is whether
XXXXXXXXXX

Your deposit will be refunded under separate cover.

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