CRA finds that the provision of paid support services by a charity to a joint venture corporation would be a bad business

A charitable corporation proposed that it and a taxable Canadian corporation would transfer assets including goodwill to a jointly owned CBCA corporation (Newco) in consideration for shares, with Newco apparently to carry on a business with the transferred assets and transferred employees.  CRA ruled that the holding of this Newco investment and the performance of broad oversight would not in itself be a business which was not a related business (which would have been a bad thing).  However, the Rulings Directorate consulted with the Charities Directorate who, among other concerns, considered that the provision of support services by the Charity to Newco (for fees equal to the greater of the services’ cost and fair market value) would be an unrelated business.

Neal Armstrong.  Summary of 2012 Ruling 2011-0431051R3 under s. 149.1(2)(a).