13 March 1990 Income Tax Severed Letter AC59482 - Capital Gains Deduction - Inventory of Real Estate Corporation Considered Used in Active 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.

19(1) 5-9482

D. Yuen
(613) 957-2111

March 13, 1990

Dear Sirs:

Re: Subsections 110.6(1) and 248(1) of the Income Tax Act (Canada) (the "Act")

We are writing in response to your letter of January 23, 1990 wherein you requested our opinion concerning the meaning of the phrase "used in an active business" as it is found in subsections 110.6(1) and 248(1) of the Act.

In the case of Qualico Developments Ltd. v. Her Majesty the Queen [[1984] C.T.C. 122] (84 DTC 6119), it was suggested that inventory was not considered used in the business until it was sold. You are concerned that the Department would utilize this view and consider inventory and land inventory of a realestate development corporation to not be used in the business until it was sold. You are concerned that the Department would utilize this view and consider inventory and land inventory of a realestate development corporation to not be used in an active business. You have requested our opinion on whether an asset held as an adventure or concern in the nature of trade, is considered used in an active business.

Comments

In our view, inventory, or land inventory of a real estate corporation, would normally be considered used in an active business for purposes of the provisions of subsection 110.6(2.1) of the Act and the definition of small business corporation in subsection 248(1) of the Act.

As stated in paragraph 3 of Interpretation Bulletin IT_459 it is also the Department's view that, although an adventure or concern in the nature of trade is included in the definition of business in subsection 248(1) of the Act, it is a question of fact, determined after a review of the relevant circumstances, whether an adventure or concern in the nature of trade constitutes the carrying on of an active business.

The comments expressed are not advance income tax rulings and are not considered binding on the Department, in respect of any taxpayers, in accordance with paragraph 24 of Information Circular 70-6R dated December 18, 1978.

Yours truly,

for Director Reorganizations and non-Resident division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch

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