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.
XXX
Re: Advance Income Tax Ruling Request
XXX
This is in reply to your letter of July 20, 1990 in which you requested an advance income tax ruling concerning whether certain shares which were deemed to have been disposed of as a result of the death of the above-noted taxpayer satisfy the definition of "qualified small business corporation share" ("qsbc share") in subsection 110.6(1) of the Income Tax Act (the "Act").
As discussed with you, we are not able to provide you with the advance income tax ruling requested because the disposition in question is considered a completed transaction rather than one that is being contemplated. Please refer to the comments in paragraph 3 of Information Circular 70-6R2 a copy of which has been enclosed. However, we are able to provide you with comments based on the information you provided to us.
XXX
One of the requirements that must be satisfied before a share can be regarded as being a qsbc share is that all or substantially all (90%) of the fair market value of a corporation's assets must have been used in an active business. In relation to this requirement, the term active business is defined in subsection 248(1) of the Act, in part, as "any business ... other than a specified investment business ...". A specified investment business is defined, in essence, to be a business, the principal purposes of which is to derive income from property such as rent. However, the definition excludes a business of leasing property that is other than real property. As previously noted XXX In this connection, we have enclosed a copy of Interpretation Bulletin IT-73R4 which discusses the Department's view with respect to an active and a specified investment business. As further discussed with you, the definition f a specified investment business also excludes a business that earns income from property where the corporation employs throughout the year more than five full-time employees, or, in certain circumstances, obtains equivalent services from an associated corporation. With respect to XXX
As a final comment, we note that it may be possible to make a claim in respect of the basic capital gains exemption which effectively exempts $100,000 of capital gains.
While we regret that we could not give you a favourable reply, we trust that the foregoing will clarify the Department's views on the subject.
Your deposit of $250 will be refunded to you under separate cover.
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© Her Majesty the Queen in Right of Canada, 1990
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© Sa Majesté la Reine du Chef du Canada, 1990
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