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:
Is there an active business by a corporation where only asset is land (inventory) held for resale?
Position:
If not a personal services business or a specified investment business it is an active business.
Reasons:
By virtue of the definitions contained in subsections 125(7) and 248(1) of the Act.
960214
XXXXXXXXXX A.M. Brake
Attention: XXXXXXXXXX
April 1, 1996
Dear Sirs:
Re: Active Business Income
This is in reply to your letter of January 4, 1996 wherein you set out a fact situation where land held for resale is the only asset of a corporation. The corporation has no employees and carries out no other activity. You asked for our views on whether the corporation carries on an active business for purposes of qualifying as a Small Business Corporation. Rather than answer your question in the light of the facts submitted, we offer our general comments.
Subsection 248(1) of the Income Tax Act (the "Act") defines an active business and business as follows:
"active business" in relation to any business carried on by a taxpayer resident in Canada, means any business carried on by the taxpayer other than a specified investment business or a personal services business.
"business" includes ..., an adventure or concern in the nature of trade ...".
Subsection 125(7) of the Act, in conjunction with subsection 248(1), provides definitions of specified investment business and personal services business and whether or not a particular corporation fits within either of these definitions is a question of fact to be determined from an examination of all the facts. However, based on the information provided it would seem that your particular corporation would not be either. Should this be the case, its activities would constitute an active business.
These comments are given in accordance with the practice of providing opinions referred to in paragraph 21 of Information Circular 70-6R2 and are not binding on Revenue Canada, Taxation.
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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