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.
5-940124
XXXXXXXXXX C. Chouinard
Attention: XXXXXXXXXX
March 24, 1994
Dear Sirs:
Re: Specified Investment Business
We are writing in reply to your letter of November 15, 1993 wherein you requested our comments as to whether the business of renting storage facilities and providing other related services to arm's length clients is an active business.
You described the following situation: The taxpayer rents storage facilities to clients who use the facilities to store raw materials used by them in their manufacturing activities. Typically, the clients send the raw materials by rail or by transport truck. When the materials arrive at destination, the taxpayer unloads them from the train or trucks and stores them in the storage facilities. Conversely, when the client requires the materials, the taxpayer loads them unto a transport truck or a train.
Your request for a technical interpretation appears to relate to a situation which arose in respect of a specific taxpayer. As indicated in paragraph 21 of Information Circular 70-6R2 dated September 28, 1990, a request for a written opinion on a completed transaction is generally considered by the taxpayer's local district office. Therefore, while we are unable to provide an opinion in respect of the situation outlined in your letter, we are prepared to offer the following general comments.
The question of whether a corporation engaged in providing rental storage facilities and other related services is carrying on active business or a specified investment business is a question of fact which can only be determined after an examination of all the relevant facts in the particular situation on a retrospective basis.
With respect to the definition of a specified investment business, it should be noted that subparagraphs 125(7)(e)(i) and (ii) of the Income Tax Act (the "Act") set out the conditions which must be met to be excluded from that definition. Thus, where a corporation carries on a business in a taxation year, the principal purpose of which is to derive income from property and neither of the aforementioned conditions are met, the corporation is considered a specified investment business.
The phrase "principal purpose" is not defined in the Act, however, paragraph 11 of Interpretation Bulletin IT-73R4 indicates that a corporation's principal purpose "is considered to be the main or chief objective for which the business is carried on". In our view, the corporation described above would be considered a specified investment business since the principal purpose of the business carried on by the corporation appears to be that of renting storage facilities. The loading and unloading services provided to the clients would likely be considered ancillary to the main objective of renting storage facilities.
Unless as otherwise stated, all references to statute are to the Income Tax Act S.C. 1970-71-72, c.63 as amended consolidated to June 10, 1993.
The foregoing comments are given in accordance with the practice referred to in paragraph 21 of Information Circular 70-6R2 dated September 28, 1990 and are not binding on Revenue Canada, Taxation.
We trust that these comments will be of assistance.
Yours truly,
R. Albert
for Director
Business and General Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch
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