90%/capability tests
7. The value of any property that is not acquired under the agreement for the supply, but that the recipient requires to carry on the business must generally be not more than 10% of the fair market value of all the property necessary to carry on the business.... The recipient must be capable of carrying on the same kind of business that was established or carried on, or acquired, by the supplier, with the property that the recipient has acquired under the agreement.
Part of business
9. In general, a "part of a business" is an activity that may be a functionally and physically discrete operating unit, or it may be an activity that supports or is related to the broader business, but is organized as a separate activity that is capable of operating on its own. The guidelines that apply when determining if there is a supply and acquisition of a business also apply when determining if there has been a supply and acquisition of "part of a business". [CRA then provides example of the sale (eligible for the election) by a pulp and paper company of the inventory, equipment and goodwill of its printing division, with the real estate being leased to the purchaser.]
Transfer of franchise business on turnkey basis/realty may not be crucial
21. In the case of a supply by a franchisor to a franchisee of a new business, the franchisor must make a supply of a business that was established (i.e., a turn-key operation and not just certain individual assets) in order to qualify for the election under subsection 167(1). In general...the following property and services should be included...: right to use a trade name/trademark, land and building, equipment necessary to operate the business, initial inventory, training of principals and staff, and operating manuals.
22. ...[W]ith respect to some service businesses, the nature of business is such that the land and building are not significant to the business operations (e.g., the office space required is minimal and the service is provided at the customer's location). In this case, a supply that does not include the land and building may still qualify as the supply of an established business... .
Transfer of an undivided interest in a joint venture
24. The transfer of an undivided interest in a joint venture could qualify for the election under subsection 167(1) if particular conditions are met. ...
