7 August 1990 Income Tax Severed Letter - Interpretation of the phrase “ actively engaged” in the definition of the term ”share of the capital stock of a family farm corporation” in paragraph 70(10)(b)

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.

Dear Sirs:

This is in reply to your letter of July 23, 1990 concerning the definition in paragraph 70(10)(b) of the term “share of the capital stock of a family farm corporation”. In particular you are concerned with the words “actively engaged” in subparagraph 70(10)(b)(i).

In our view the words “actively engaged” in subparagraph 70(10)(b)(i) refer to a person who in his capacity as shareholder or employee was actively involved in the management and/or day to day activities of the farming business carried on by the corporation. The person would ordinarily be expected to contribute time, labour and attention to the business to a sufficient extent that such contributions would be determinant in the successful operation of the business. This is in contrast to a passive shareholder or investor who would not be considered to be “actively engaged”.

We trust our comments will be of assistance.