Table of Contents


Loblaw Financial Holdings Inc. v. Canada, 2020 FCA 79

receipt of equity funds from parent was not part of Barbados bank’s business

At issue was whether a Barbados bank subsidiary (Glenhuron ) of the taxpayer, which used equity funds received from its Canadian parent to invest in short-term debt obligations, conducted its business principally with persons with whom it dealt at arm’s length, as required in s. 95(1) - investment business - (a). In finding that what the Crown argued to be the “receipt side” of Glenhuron’s business, i.e., “the capital investments by the Loblaw group [,] were not part of Glenhuron’s conduct of business” Woods JA stated (at paras. 82, 84-85):

For purposes of the ITA, the term “business” generally means “something occupying the time and attention and labour of a man for the purpose of profit” … .

Applying the meaning of “business,” there is no reason to conclude that the capital invested by the Loblaw group would have occupied the time and attention of Glenhuron in any meaningful way.

[T]his approach is consistent with long-standing jurisprudence which draws a distinction between “capital to enable [people] to conduct their enterprises” and “the activities by which they earn their income” … .

Words and Phrases
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Investment Business - Paragraph (a) a Barbados bank sub conducted its business of investing in short-term debt principally with arm’s length persons 580
Tax Topics - Statutory Interpretation - Redundancy/reading in words error to apply an unexpressed intention 160
Tax Topics - Statutory Interpretation - Drafting Style no additional requirements should be inferred in legislation drafted with “mind-numbing detail” 160
Tax Topics - General Concepts - Separate Existence subsidiary did not manage its funds on behalf of parent 151
Tax Topics - Income Tax Act - Section 95 - Subsection 95(1) - Foreign Accrual Property Income fundamental purpose of FAPI is to capture passive income 158

Inwest Investments Ltd. v. The Queen, 2015 BCSC 1375

Marconi test of "business" applied outside source-of-income context

The filing position of the taxpayer (Wesbild), that it did not have a permanent establishment in B.C., was based on an application of the Marconi test of what was a business, so that under Reg. 400(2) it did not have a fixed place of “business” in B.C. CRA reassessed (but not until after the normal reassessment period) on the basis that, in the context of Reg. 400 et seq., “business” included having property or taxable capital gains as the only sources of income.

After finding that the filing position of Wesbild was reasonable and, therefore, not a “misrepresentation,” Fitzpatrick J stated (at para. 181):

Wesbild’s filing position conformed to the Marconi test… . There is no indication that the CRA’s currently-advanced dictionary definition of “business” had any support at all in 2001/2002 or even at this time.

Words and Phrases
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(a) - Subparagraph 152(4)(a)(i) reasonable filing position position cannot be a “misrepresentation” 508
Tax Topics - Income Tax Act - Section 232 - Subsection 232(1) - Solicitor-Client Privilege not necessary to provide legal opinion to rely on having consulted legal counsel 215
Tax Topics - Income Tax Regulations - Regulation 400 - Subsection 400(2) no fixed place of “business” if no source of business income 165
Tax Topics - Statutory Interpretation - French and English Version "misrepresentation" informed by narrower French version 103

2529-1915 Québec Inc. v. Canada, 2009 DTC 5023 [at 5585], 2008 FCA 398

shares premiums received for marketing tax scheme were business income

The two individual taxpayers devised a scheme to: generate artificial capital gains of $110 million in some home-grown companies; pay the supposedly resulting capital dividend accounts (CDAs) of $55 million to another company (1915); generate artificial capital losses in the home-grown companies to offset their capital gains; effectively sell negotiated portions of the CDA to 3rd-party purchasers by having them subscribe for preferred shares at a 21% premium to their redemption amount with the shares' redemption amounts effectively being flowed out to the 3rd parties as purported capital dividends; and then pocketing such subscription "premiums" as capital dividends paid out to them. A more detailed summary of the facts is under s. 83(2).

In finding that the share premiums received by 1915 were business income to it, Noël JA found (at para. 64) that as the maximum value of the preferred shares was $1,000 "the premium was therefore paid for something other than the shares [and] this was obviously access to the CDAs," and stated (at para. 66):

[A]s additional amounts collected by the corporate appellants were generated in the course of successive operation the purpose of which was to produce surpluses, all the factors underlying the existence of a business are present."

Locations of other summaries Wordcount
Tax Topics - General Concepts - Sham capital dividend elections for distributions of what should have been known to be income-account gains were shams 245
Tax Topics - General Concepts - Tax Avoidance capital dividend elections for distributions of what should have been known to be income-account gains were shams 245
Tax Topics - Income Tax Act - Section 83 - Subsection 83(2) capital dividend elections for distributions of what should have been known to be income-account gains were shams 656
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Shares shares acquired for immediate resale as part of capital dividend account generation scheme were on income account 160
Tax Topics - Income Tax Act - Section 9 - Exempt Receipts/Business shares premiums received for marketing tax scheme were business income 204

Hammill v. Canada, 2005 DTC 5397, 2005 FCA 252

fraudulent scheme foisted on taxpayer was not a business

The taxpayer purchased gems for an amount in excess of their worth, and then paid a total of $1,651,766 in charges purportedly made to secure a sale of the gems (which never occurred). This was a fraudulent scheme from the beginning to end and, accordingly, did not qualify as a business. Accordingly, the expenses so paid by the taxpayer were not deductible.

Partridge v. Canada, 2003 DTC 5175, 2003 FCA 91 (FCA)

The Tax Court Judge did not commit a reviewable error when he found that the taxpayer's activities lacked commercial flavour and that the taxpayer was not engaged in farming activities to make a profit, but primarily to provide food for his table. As such, his activities did not amount to a business.

Stewart v. Canada, 2002 DTC 6969, 2002 SCC 46, [2002] 2 S.C.R. 645

"business" has its broad common law definition

Before going on to find that rental condominium units of the taxpayer represented a source of income and that it was not necessary for the taxpayer to establish that he had a reasonable expectation of profit therefrom, Iacobucci and Bastarache JJ. stated (at para. 38) that:

"Equating the term 'business' with the phrase 'reasonable expectation of profit' does not accord with the traditional common law definition of business, which is that 'anything which occupies the time and attention and labour of a man for the purpose of profit is business'."

Hudon v. Canada, 2001 DTC 5630, 2001 FCA 320

In the years in question a corporation which owned forest concessions and rights to develop the hydro electric potential of a river was engaged in negotiations with Hydro-Quebec and other activities with a view to developing that potential. Desjardin J.A., before going on to find that the taxpayer was engaged in a business, noted that the word business was defined to include an undertaking of any kind whatsoever and also noted that the determination of whether a taxpayer was engaged in an active business was a mixed question of fact and law.

Timmins v. The Queen, 99 DTC 5494 (FCA)

N.B. government had a servicing undertaking, i.e., a business

The taxpayer was employed by the New Brunswick Department of Agriculture and Rural Development to assist in establishing and administering several dairy farms in Malawi, in consideration for which the Department received fees that were intended to cover its cost, cover overhead and make a small profit. In finding that the Department satisfied the requirement that it be carrying on a business, Noel J.A. stated (at para. 12) that in applying the definition of business in s. 248(1):

"It seems clear that even if it could be said that the Department was not carrying on a business in the ordinary sense, it was at least engaged in an 'undertaking of any kind whatever', namely the provision of services under a contract for a fee."

In any event, the Department was engaged in the business in the ordinary sense. Although the expected profits were small "a profit is a profit whether big or small and irrespective of one's motivation for generating it" (para. 21).

Words and Phrases
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 122.3 - Subsection 122.3(1) provision of services by governement for fees was an undertaking and business 161

The Queen v. Canada Trustco Mortgage Co., 99 DTC 5094 (FCTD)

In its 1984 taxation year, a controlled foreign affiliate of the taxpayer ("B.V.") earned interest on a promissory note that B.V. had acquired from an affiliated Canadian corporation and reinvested that interest in bank deposits, and in 1985 B.V. earned income from interest paid on Canadian mortgages. The Minister conceded that the interest on the note was active business income rather than foreign accrual property income (fapi), but assessed on the basis that the other interest income was fapi. In finding that B.V. was carrying on an active business MacKay J. noted that the investing activities of B.V. were within the scope of the objectives set out in its articles of incorporation, supervising managing directors of B.V. met on a quarterly basis, B.V. through its supervisory director had investigated making other acquisitions in addition to those that it actually made, it used staff resources provided by affiliated companies in Amsterdam in connection with receiving and accounting for payments made on the note, and indicated that it was not appropriate for the Minister's reassessment not to relate to the whole of the income of B.V. so that the concession of the Minister that interest on the loan was from an active business assisted the taxpayer's position.

Loewen v. The Queen, 94 DTC 6265 (FCA)

generation of tax gain but with no prospect of commercial profit was not an adventure in the nature of trade

The taxpayer paid $200,000 for a debenture that was redeemable by both the company and him for $140,000, and realized a gain for tax purposes of $40,000 when the debenture was redeemed because a particular provision applicable to “SRTC debentures” (ITA s. 127.3(1)) had reduced the cost amount to him of the debenture to $100,000.

Hugessen J.A. noted (at p. 6268) that the taxpayer had been assessed, not on the basis that the profit he had realized for tax purposes was from a business in the general sense of the word but, rather, on the basis that it was from an adventure in the nature of trade, and that “the notion of an adventure in the nature of trade extends the reach of the charging sections to transactions which, although not carried out by a trader, are of the same kind as trading transactions.” He further noted (also at p. 6268) that “while a positive finding that a transaction was for speculation or for investment may be decisive as to whether it was or was not a trading transaction, an equivalent finding, i.e., that it was not one or the other of those things, cannot be” – as was the case here as the taxpayer’s debenture purchase had effectively been admitted not to be an investment.

In finding that the taxpayer’s gain for purposes of the Act was a capital gain, Hugessen J.A. stated (p. 6269) that he did "not think it can properly be said that a transaction whose sole purpose is to reduce the tax otherwise payable by a taxpayer is, for that reason alone, an adventure in the nature of trade" and (p. 6270) that although "an intention to make a profit is not essential in order for a transaction to be characterized as an adventure in the nature of trade, such transaction must be one from which it is possible to derive a profit in a commercial sense".

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Loans adventure must be capable of generating a commercial profit 150

Friesen v. Canada, 95 DTC 5551, [1995] 3 S.C.R. 103

s. 10(1) applied to an adventure in the nature of trade even if that deemed business was not “carried on”

In finding that a decline in the value of a property that was held as an adventure in the nature of trade and not as stock-in-trade of a real estate trading business qualified as inventory whose decline in value could be deducted in computing income under s. 10(1), Major J stated (at para. 55):

I do not accept the argument that s. 10(1) applies only to those who "carry on a business".

R. v. Fogazzi, 92 DTC 6421 (Ont. C.J. (G.D.)), rev'd 93 DTC 5183 (Ont. CA)

Before going on to find that the misappropriation by the accused of money received from Italian relatives did not give rise to income from an adventure in the nature of trade, Sheppard J. stated (p. 6427):

"'Adventure or concern' means the isolated nature of the transaction. 'In the nature of trade' means this person has conducted himself in the same manner as a person who would have who is in the business of trading in land."

Quirinus C. Van Dongen v. Her Majesty The Queen, 90 DTC 6633, [1991] 1 CTC 86 (FCTD)

In finding that the taxpayer did not acquire two real estate properties in connection with an adventure in the nature of trade, Cullen J. stated (p. 6635):

"An adventure in the nature of trade involves an isolated transaction only ... However, the isolated nature of the transaction by itself is not enough to conclude that it is an adventure in the nature of trade."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 10 - Subsection 10(1) 87

Levy v. The Queen, 90 DTC 6346 (FCTD)

In rejecting a submission that the taxpayer's income from a horse racing syndicate was income from property rather than business income because the taxpayer's involvement in the syndicate was passive, Rouleau, J. stated:

"I am not satisfied that income from an investment in horses, even though care and maintenance was performed by someone other than the taxpayer, could constitute income from property. The active involvement of someone is required in order that the horses may generate revenues; they cannot do so by themselves."

Pollock v. The Queen, 90 DTC 6142 (FCTD), aff'd 94 DTC 6050 (FCA)

Taxpayer's counsel unsuccessfully submitted that because the definition of "business" specifically excluded an office or employment, the Minister's assumption that the taxpayer had received employee stock options in connection with an adventure in the nature of trade could not stand. "[A"] taxpayer may acquire shares under employee stock options and at the same time become engaged in an adventure in the nature of trade with respect to the shares so acquired." (p. 6146)

Words and Phrases

Ward v. The Queen, 88 DTC 6212, [1988] 1 CTC 336 (FCTD)

adventure is not the carrying on of a business

"The term 'business' by definition includes an adventure in the nature of trade but it is not synonymous with carrying on a business. This latter concept requires more than the isolated type of transaction referred to as 'an adventure in the nature of trade'."

Words and Phrases

Alberta Institute on Mental Retardation v. The Queen, 87 DTC 5306, [1987] 2 CTC 70 (FCA)

"I do not think that the association of a charitable organization with a commercial enterprise necessarily impresses that charitable organization with the characteristics of a 'business'".

Happy Valley Farms Ltd. v. The Queen, 86 DTC 6421, [1986] 2 CTC 259 (FCTD)

In determining "when a transaction, which is not itself a trade or business, can be held to be 'an adventure or concern in the nature of trade' ... the question to be answered, ... was the asset acquired by the taxpayer as an investment or was it not."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Real Estate farmland gain of real estate developer 71

Mele v. The Queen, 85 DTC 5192, [1985] 1 CTC 257 (FCTD)

The objects in the articles of incorporation of a company indicated that it was not in the business of lending money.

The Queen v. Manley, 85 DTC 5150, [1985] 1 CTC 186 (FCA)

minimal-effort finder's fee

The taxpayer engaged in an adventure or concern in the nature of trade when he agreed with an individual ("Levy") to find a purchaser for the controlling shares owned by the Levy family in return for a 2% finder's fee, and then found such a purchaser. It was irrelevant that the taxpayer neither risked nor used money or property, and that he expended less effort than most finders would have done.

Canadian Marconi Co. v. The Queen, 84 DTC 6267, [1984] CTC 319 (FCA), rev'd 86 DTC 6526, [1986] 2 CTC 465, [1986] 2 S.C.R. 522

investment portfolio of manufacturing co gave rise to income from property

"[F]or purposes of the Income Tax Act, the fact that an activity is engaged in for the purpose of making a profit cannot be decisive of the question whether income from it has its source in 'business', on the one hand, or in 'property' on the other." The managing of an investment portfolio by a company primarily engaged in the business of manufacturing electronic equipment, was characterized as deriving income from property.

Hillsdale Shopping Centre Ltd. v. The Queen, 81 DTC 5261, [1981] CTC 322 (FCA)

"[T]he restricted nature of the corporate powers of the taxpayer ... is a fact but it is not a critical one in determining liability for tax. The question to be decided is not as to what business the company might have carried on according to its charter, but rather what business it did carry on."

Gillis v. The Queen, 78 DTC 6103, [1978] CTC 44 (FCTD)

In order for an undertaking to be considered a "business" it must be carried on with a reasonable expectation of profit. Dubinsky, DJ stated (at p. 6110, DTC):

That [the taxpayer] made some isolated sales of potatoes and grain and some hay did not turn what I find as a fact to be a hobby undertaking into a business one.

Words and Phrases

M.R.T. Investments Ltd. v. The Queen, 75 DTC 5224, [1975] CTC 354 (FCTD), aff'd 76 DTC 5156 (FCA)

The corporation, whose sole activity was to acquire mortgages of sub-prime mortgagees, and which at the beginning of the taxation year in question held 14 mortgages totalling $104,637, was found to derive its net interest income as income from a business and from an active business. It, along with various other companies, was administered by specialists in the field of lending money on mortgages, the loans required careful investigation and negotiation of the terms, some refinancing activity occurred, the company operated with borrowed funds through a line of credit from a bank and the lending or purchasing of mortgages was the business for which it was formed.

The Court of Appeal, before going on to affirm the finding that the taxpayer's business was "active", stated (at p. 6157):

"The contrast in section 3(a) of the Act between 'business' and 'property' as sources of income makes it clear, I think, that a line must be drawn, for the purposes of the Act, between mere investment in property (including mortgages) for the acquisition of income from that property and an activity or activities that constitute "an adventure or concern in the nature of trade' or a 'trade' in the sense of those expressions in section 248."

MNR v. Mandelbaum, 62 DTC 1093 (Ex Ct)

individuals purchased mortgages in similar manner to dealers, so that an adventure

In finding that the purchase by individual shareholders of a company of mortgage receivables and conditional sales contracts owing to that company was an adventure in the nature of trade in addition to being a transaction in the course of their business of managing the company, Thorson P. stated (at p. 1098) that "if a person deals with the commodity purchased by him in the same way as a dealer in it would ordinarily do such a dealing is a trading adventure" and that "when the respondents purchased [the company's] mortgages and agreements their transaction was similar to the kind of transactions that dealers in mortgages and agreements engaged in".

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 16 - Subsection 16(1) no-application where mortgage receivables on income account 156
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Loans 239

Drumheller v. MNR, 59 DTC 1177, [1959] CTC 275 (Ex Ct)

lump sum received in lieu of franchise rights was from an undertaking

The taxpayer, who orally agreed with his brother-in-law to jointly seek a franchise to supply a town with natural gas, received $10,000 in lieu of his rights in respect of the franchise which ultimately was obtained, having advised his brother-in-law that he would be required to devote most of his time to a well-servicing company, rather than to serving in a position with the gas company that was to supply the town under the franchise.

The project was "an undertaking of any kind" and the $10,000 receipt was income from a business, rather than a capital receipt. Thurlow J. stated (at p. 1180, DTC):

"the expression an undertaking of any kind appears to me to be wide enough by itself to embrace any undertaking of the kinds already mentioned in the definition; that is to say, trades, manufactures, professions, or callings, and any other conceivable kinds of enterprise as well."

Words and Phrases

MNR v. Taylor, 56 DTC 1125, [1956] CTC 189 (Ex Ct)

purchase of large quantity of lead for resale was an adventure

A transaction whereby the taxpayer purchased lead and resold it to his employer at a gain was an adventure in the nature of trade - notwithstanding that he engaged in the transaction in order to assist the business of his employer (of which he is a general manager) rather than to make a profit, and notwithstanding that this was the only transaction of that type which he had engaged in personally - in light of the fact that "he dealt with the lead in exactly the same manner as any dealer in imported lead would have done" (p. 1139), in light of the speculative nature of the transaction, and in light of the fact that lead is a commodity rather than property of an investment nature.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Commodities, and commodities futures and derivatives executive's substantial lead purchase with view to resale to employer/meaning of adventure 167

C.I.R. v. Marine Steam Turbine Co. Ltd. (1919), 12 TC 174 (K.B.D.)

"'Business' is a very wide word, and it is a wide elastic word in its extent, of course, but it has two distinct meanings. It may mean any particular matter or affair of serious importance ... [or] an active occupation or profession continuously carried on, and it is in this sense that the word is used in the Act with which we are here concerned."

See Also

Watson as trustee for the Murrindindi Bushfire Class Action Settlement Fund v Commissioner of Taxation, [2020] FCAFC 92

administration of litigation trust (generating interest income) was not a business

A trust for distributing $300M in class action damages to the class claimants earned $8.4M in interest income on the funds and incurred $4.3M in various expenses in assessing the claims of the various claimants before distributing the damages. The costs related to the derivation of the interest income were minimal. The Australian taxing statute provided:

You can deduct from your assessable income any loss or outgoing to the extent that:

  1. it is incurred in gaining or producing your assessable income; or
  2. it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income.

In finding that such expenses were not deductible because there was no business and that such expenses were capital expenditures, the Full Federal Court of Australia stated (at paras. 42, 48):

[T]he taxpayer, in administering the Fund, was not turning his talent to account for money but was administering a court-approved scheme for the distribution of a settlement sum agreed upon by parties to a class action. ...

Properly analysed, the costs of administering the scheme were costs incurred in the course of effecting the distribution of the settlement sum to claimants entitled to share in the settlement sum, and thus costs incurred on capital account. The requirement that the settlement sum be held in interest-bearing accounts pending distribution as part of the Distribution Scheme does not give the costs of administering the scheme the character of revenue outgoings.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Oversight or Investment Management expenses incurred in administering a litigation settlement fund were not deductible from the related interest income 462

Samarkand Film Partnership No. 3 & Ors v Revenue and Customs, [2017] EWCA Civ 77

non-trading business

At issue was whether two partnerships which acquired interests in films and immediately leased their acquired interest for fixed, increasing, secured and guaranteed rental payments for a 15 year period, and were acknowledged to have a business, were carrying on a trade.

The following is a simplified description of the sale and leaseback structure and associated cash flows. The partners borrowed 8 from the Bank of Ireland and used that 8 together with 2 of their own funds to contributed 10 to the partnership. The partnership bought the film from the seller for 9 and leased the film to Haiku for a period of 15 years in return for fixed but escalating rentals. Haiku licensed the film directly or indirectly back to the seller; the seller paid or procured the payment of 8 to Haiku (retaining a "producer's net benefit" of 1) and Haiku placed 8 on deposit to secure the guarantee of its rental obligations The partners' loans and interest were discharged from the rental payments made out of Haiku's deposit and the partnership paid a fee of 1 to the promoter.

"Trade" was defined to include “every trade, manufacture, adventure or concern in the nature of trade."

In affirming the finding below (initially made by the First-Tier Tribunal) that the partnerships were not carrying on a trade, Arden LJ stated (at paras 59, 61, 66):

… [I]t is now clear from Eclipse… that the question whether what the taxpayer actually did constitutes a trade has to be answered by standing back and looking at the whole picture… .

… The [FTT’s] overall assessment of the commercial nature of the agreements as the payment of a lump sum in return for a series of fixed payments over 15 years…was not a crude conclusion based on an impermissible transformation of the taxpayers' activities into an economic equivalent, but rather a way of expressing the ultimate inference of fact which they drew from the totality of the primary facts which they had found.

…[T]he FTT correctly focused on the position after the investors joined the partnerships, and treated the previous activities of the founding partners as preparatory steps which in themselves threw no light on the question whether the partnerships were trading when the deals were eventually closed.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 96 whether partnership exists while only preliminary partners 199
Tax Topics - Income Tax Act - Section 96 - Subsection 96(1) - Paragraph 96(1)(a) rent received qua landlord rather than partner 135

Mazo v. The Queen, 2016 TCC 232 (Informal Procedure)

pyramid scheme gives rise to business, not property, income

The taxpayer (Ms. Mazo) participated in and profited on balance from a pyramid scheme, which in form entailed the participants paying the promoter (“BIMIC”) around $3,200 each to join the bottom of a purported sales organization (the pyramid), recruiting people to join a level below them, and receiving a pay-out if the pyramid beneath them expanded to four levels deep. Money earned by them as a result of rising to the top in this manner as a “director of sales” could at their option be paid to them in cash or, among other options, retained as a credit in their account with BIMIC.

In finding that the profits of the taxpayer were business rather than property income (as would be the case for a Ponzi scheme), Graham J stated (at paras 16, 20):

… [P]articipants in a Ponzi scheme normally believe that they are making an investment that is, in turn, generating profits for them. … By contrast, while participants in a pyramid scheme may not realize the full nature of the pyramid scheme … , they are aware on some level that they are buying into a structure whereby they receive profits through the recruitment of new people into that structure. … In simple terms, a participant in a Ponzi scheme is conned by the promoter into investing in something fake. A participant in a pyramid scheme is conned by the promoter into believing that the scheme will actually work and that he or she will profit through his or her own efforts.

…Since Ms. Mazo did recruit new people and was paid for doing so, I conclude that those payments, net of any expenses, were business income in her hands.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 9 - Timing revenue earned when credited to taxpayer's account with promoter 208
Tax Topics - Income Tax Act - Section 3 - Business Source/Reasonable Expectation of Profit pyramid scheme a source of business income 86

Staltari v. The Queen, 2015 DTC 1130 [at 818], 2015 TCC 123

no business where no business organization

The taxpayer donated land to the City of Ottawa, received a charitable receipt for its appraised value and claimed that his gain resulting under s. 69(1)(b) from the donation was exempted under s. 38(a.2) (respecting donations of capital property described in the "total ecological gifts" definition in s. 118.1(1)).

Before affirming this treatment, Owen J noted (at para. 78) that there were none "of the typical indicia of a business, such as a business plan or strategy, a marketing plan, financial records, an office, furniture, office supplies, a telephone listing, an e-mail address, a computer, stationery, business cards, one or more employees, actual or prospective customers, advertising, marketing, a website, banking arrangements, solicitations of business, business-related documents, etc." and (at para. 80) that "the commercial activities of [his] corporations cannot be attributed to Mr. Staltari personally without evidence that he, and not the corporations, was conducting those activities."

See summary under s. 9 – capital gain v. profit – real estate.

Locations of other summaries Wordcount
Tax Topics - General Concepts - Evidence uncorroborated testimony 80
Tax Topics - Income Tax Act - Section 38 - Paragraph 38(a.2) land donated in order to achieve tax benefit was still a gift to a qualified donee 119
Tax Topics - Income Tax Act - Section 39 - Subsection 39(1) - Paragraph 39(1)(a) exclusion of gains that are ordinary income 139
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Real Estate secondary intention to develop land irrelevant if land donated instead 484

Prochuk v. The Queen, 2014 DTC 1050 [at 2917], 2014 TCC 17

trading RRSP funds does not make the annuitant a trader

The taxpayer, whose principal source of income was his RRSP, received distributions of $63,750 on an investment made outside his RRSP in a purported foreign currency trading fund promising a fixed yield of 17.5% p.a., before the fund's fraudulent nature was discovered. His $186,250 loss was not from an adventure in the nature of trade because the evidence was clear that the taxpayer approached the $250,000 investment as an investor and not a trader, including that the investment was held passively and was locked in for 28 months (para. 55). Respecting his active trading of investments held in his RRSP, "trades within an RRSP are not relevant in deciding whether an individual is in the business of trading" (para. 48).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Loss v. Loss trading RRSP funds does not make the annuitant a trader 114
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Shares trading RRSP funds does not make the annuitant a trader 114

Eclipse Film Partners (No. 35) LLP v Revenue and Customs Commissioners, [2014] BTC 503, [2013] UKUT 0639 (TCC), aff'd [2015] EWCA Civ 95

speculative element of trade

Before affirming a finding below that the appellant partnership, which had been licensed rights to exploit two films, was not carrying on a trade but instead had "non-trade business," Sales J stated (at paras. 78-79):

[78]…[A]n element of speculation in the sense of conducting an activity which might result in a profit or a loss is strongly indicative of that activity being capable of having the character of trading, and the absence of such an element is strongly indicative that it is not a trading activity.

[79] That interpretation is also supported by the way in which 'trade' was defined at the relevant time and has been defined in tax legislation for a long time, as including 'every trade, manufacture, adventure or concern in the nature of trade' (see e.g. section 832(1) ICTA 1988, set out at [398]). In a list of terms like this, the meaning of each item naturally takes some colour from those listed with it. In old legal language, the 'nosçitur a sociis' principle is relevant: the meaning of a term is given or informed by its fellow terms deployed in the same list. Here, the use of the word 'adventure' is redolent of business activity of a speculative kind, and this informs the meaning to be given to 'trade'.

Locations of other summaries Wordcount
Tax Topics - Statutory Interpretation - Consolidations construed in integrated manner 146
Tax Topics - Statutory Interpretation - Hansard, explanatory notes, etc. Explanatory Notes more valuable than white papers 222

Leblanc v. The Queen, 2007 DTC 307, 2006 TCC 680

winnings on internet gaiming were non-taxable

The two taxpayers, who together won over $5.5 million during a four year period from playing sports lottery parlay games, were found to not be subject to tax under s. 9 on those winnings and to have realized the gains as exempt capital gains under s. 40(2)(f). Bowman C.J. found that the large number of bets placed by them was not itself indicative of anything other than a tendency to bet heavily and accepted expert testimony that given the rigid game structure, artificial winning caps and the minimal impact (if any) of sports-related knowledge, sports lottery parlay games offered overwhelming odds against players succeeding on a regular basis, so that they could not reasonably expect to earn a profit. The taxpayers were not professional gamblers who assessed the risks, minimized them and relied on inside information and knowledge and skill but, instead, would more accurately be described as compulsive gamblers.

Wadley v. The Queen, 2006 DTC 3401, 2006 TCC 440 (Informal Procedure)

The taxpayer let her neighbour's cattle graze on her pasture in consideration for a monthly fee per head, and agreed with her neighbour that he could crop-share her hay field. In finding that the activities of the taxpayer with respect to the pasture went beyond what was normally expected of the landlord in the maintenance of her rental property, Sheridan J. noted that the taxpayer cut brush and weeds along the fence line, trapped moles, harrowed the pasture to remove their burrows, kept water troughs full and salt supplies replenished. In finding that the taxpayer also was engaged in business activity with respect to the hay field, he noted that she had to fertilize and harrow the hay field and decide how often the hay should be cut in order to maximize the field production. In addition, her own equipment was used in the hay production and harvest and she cut brush, bailed hay and hauled bails.

Aviva Canada Inc. formerly CGU Group Canada Ltd. v. The Queen, 2006 TCC 57

purchase and immediate resale at the same FMV was not an adventure

In settling a dispute between the appellant and another insurance company, Canadian Group Underwriters Insurance Company ("Underwriters"), as to the ownership of two trademarks, Underwriters' interest in the trademarks was first transferred under ITA s. 85 to an affiliated corporation ("NN Life") in order to access NN Life losses, and then sold on the same day by NN Life to the appellant for $5 million in cash. The appellant was not entitled to an input tax credit for the GST charged on the sale. It applied for a refund of the GST under s. 261 on the basis that the trademark had not been sold to it in the course of a commercial activity.

In finding that the sale by NN Life was not an adventure in the nature of trade, Woods J stated (at para. 24):

NN Life did not negotiate the sale and likely acted as an accommodation party in order to minimize the income tax payable on the sale. The trademarks were acquired by NN Life on the same day as the sale to the appellant and NN Life gave consideration to Underwriters equivalent in value to what it received from the appellant. In no sense does this describe what McLaughlin J. referred to in Continental Bank as a "speculative trading venture."

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 141.1 - Subsection 141.1(2) - Paragraph 141.1(2)(a) purchase and immediate resale at the same FMV was not commercial activity 205
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Commercial Activity purchase and immediate resale at the same FMV was not commercial activity 207
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Trademarks purchase and immediate resale at the same FMV was not an adventure 272

Richter & Associates Inc v. The Queen, 2005 TCC 92

litigation support services provided by trustee for bankrupt financial institution were an "undertaking"

The trustee in bankruptcy for a company ("Castor") which had essentially only engaged in investing in high-yield loans brought an action in its capacity of trustee for the Castor estate against the former auditors ("C&L") for $40 million in damages for breach of contract, and also began a "litigation support business" of providing assistance to most of the creditors (the "Participating Creditors"), including hiring professionals and experts, in connection with their action sounding in negligence against C&L for $800 million in damages. To the extent that, on settlement of the litigation, Richter was not able to recover its costs out of the proceeds of an award made to it on its own claim, Richter at such time would invoice the creditors for its remaining unrecovered costs, to be paid by set-off against loans they had made to it in the interim.

After noting (at para. 21) that "the word ‘undertaking' has been defined in … Drumheller v. M.N.R., 59 DTC 1177, 1180 (Exch. Ct.), as embracing ‘. . . trades, manufactures, professions, or callings, and any other conceivable kinds of enterprise as well," Archambault J stated (at para. 32):

[T]he litigation support services to the Participating Creditors constitute, if not a profession as defined in the Maxse case [[1919] 1 K.B. 647], at least an undertaking as this term is used in the definition of a "business". Given the nature of these activities and the continuous involvement required from the Estate in order to provide the services during the relevant period and that will be required from it in future years, this undertaking amounts to a business being carried on by the Estate.

See summary under ETA s. 141.01(2).

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Business litigation support services provided by trustee for bankrupt financial institution were an "undertaking" 269
Tax Topics - Excise Tax Act - Section 141.01 - Subsection 141.01(2) allocation between costs incurred by trustee in bankruptcy for bankrupt financial institution to provide litigation services to creditors, and costs incurred in connection with its action qua trustee 375
Tax Topics - Excise Tax Act - Section 141.01 - Subsection 141.01(5) allocation between own suit and litigation support 68
Tax Topics - Excise Tax Act - Section 141.1 - Subsection 141.1(3) - Paragraph 141.1(3)(b) action brought by trustee for bankrupt financial institution deemed to be not in course of commercial activity 184
Tax Topics - Excise Tax Act - Section 265 - Subsection 265(1) - Paragraph 265(1)(f) trustee's own suit and litigation support activity were related 278
Tax Topics - General Concepts - Illegality Act applied to what has occurred irrespective of legality 134

Rocovitis v. Dominion of Canada General Insurance Co. (2005), 63 OR (3d) 402 (CA)

An exclusion in an insurance policy for loss resulting from engaging in a "trade, profession or occupation" did not apply to an individual doing odd jobs for a minimal payment. Not all activities generating profits will be automatically classified as "business" activities.

Wright v. The Queen, 2003 DTC 763 (TCC)

The taxpayers and their father had used 430 acres of a 5,700 acre property in Manitoba for farming for many years before farming ceased in the early 1970s. Commencing in 1995 they entered into two contracts for the sale of all the timber on different sections of the property for a stipulated price plus one-half of the increased revenue realized by the contractor as a result of any increase in the price of lumber.

Miller T.C.J. found that, on balance, the actions of the taxpayers, when compared to those of a commercial wood lot operator, did not display sufficient characteristics of a trader in timber to find that they were involved in an adventure in the nature of trade.

Banner Pharmacaps NRO Ltd. v. The Queen, 2003 DTC 245, 2003 TCC 82, aff'd 2003 FCA 367, 2003 DTC 5642

The taxpayer was not considered to be engaged in a business of making loans by virtue of the Canadian corporation of which it was a sole shareholder declaring a dividend and a stated capital reduction to be paid by way of the issuance of demand promissory notes.

Words and Phrases
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 9 - Timing 87

Yunger v. The Queen, 2000 DTC 2153 (TCC)

Before going on to find that the taxpayer had not made three loans in the ordinary course of a business of lending money, for purposes of s. 20(1)(p)(ii), Bonner TCJ. stated (at p. 2156):

"The borrowing of money with a view to re-lending it at a higher rate of interest is an activity which is distinctly different from the investment of one's savings in mortgage loans. The former activity is strong evidence of the existence of a money lending business. However, I am not convinced that this is what the Appellant did. ... One of the factors which differentiates between loans made as simple investments of capital and loans made in the course of the business of a money lender is continuity."

Waxman v. The Queen, 97 DTC 705 (TCC)

Archambault TCJ. indicated that if the issue had been raised before him, he would have been inclined to doubt that a partnership that was engaged in R&D programs respecting the feeding and sheltering of steer was engaged in a business given the absence of any sales of steers in the taxation years in question and the R&D purposes for the partnership.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 37 - Subsection 37(8) 108

Samson et Fréres Ltée v. The Queen, 97 DTC 642 (TCC)

After finding that expenses incurred by the taxpayer were non-deductible because it had not yet commenced to carry on a business, Dussault TCJ. went on to reject a submission that the taxpayer's activities could constitute an adventure or concern in the nature of trade because "none of the activities relating to the efforts to set up the new business was in itself capable of generating income". (p. 647)

Toronto Stock Exchange v. Regional Assessment Commissioner (1996), 136 DLR (4th) 362 (Ont CA)

The Toronto Stock Exchange, which was a corporation without share capital and whose objects were to operate an exchange for trading in securities by its members, was found not to have as its preponderant purpose the making of a profit. Accordingly, it was exempt from tax under s. 7(1)(f)(i) of the Assessment Act (Ontario) (which contemplated business assessments on every person occupying land in connection with the carrying on of a financial or commercial business) notwithstanding that its members used the exchange for profit-making activity.

Re City of Calgary and Alberta Assessment Appeal Board (1989), 62 DLR (4th) 764 (Alta. C.A.)

The Calgary Real Estate Board Co-operative Limited was found not to be a "business" for purposes of the Municipal Taxation Act (Alberta), which defined a "business" as "any activity or undertaking of a commercial, merchandising or industrial nature and includes a trade, profession, occupation, employment or calling and the providing of goods and services".

Words and Phrases

Atkinson v. Dancer, [1988] BTC 364 (Ch.D.)

The test to be applied in determining whether a transaction was the sale of a business or part of a business was whether the transaction caused a material interference with the whole complex of activities involved in carrying on the business. [C.R.: 23(1)]

Marson v. Morton, [1986] BTC 377 (Ch. D.)

Before finding that an isolated transaction, whereby individuals bought undeveloped land and sold it three months later at a substantial gain, was not an adventure in the nature of trade, Sir Nicolas Browne-Wilkinson V.-C. listed (at pp. 385-386) nine badges of trading.

Re Ontario Jockey Club and City of Toronto (1986), 53 OR (2d) 151 (HCJ.), aff'd (1988), 61 OR (2d) 131 (Div. Ct.)

The predominant purpose of a non-profit corporation without share capital, which operated horse-racing properties and applied substantial profits which it earned to the retirement of its debt, was to provide a facility that was a contribution to the horse-racing industry rather than the making of profits to be used to support the racing industry. The corporation accordingly was not carrying on a "business" (Assessment Act (Ont.), s. 7(1)(j)).

Commissioners of Customs and Excise v. The Rt. Hon. Lord Fisher, [1981] T.R. 59 (HC)

Lord Fisher invited his hunting friends and relations to shoot pheasants on his estate each year, and required a "contribution" from those who accepted his invitations. It was held that he was not engaged in a "business" within the meaning of the Finance Act 1972. "[T]he true meaning of the word 'business' in the context of this Act excludes any activity which is no more than an activity for pleasure and social enjoyment."

Words and Phrases

American Leaf Blending Co. Spn. Bht. v. Director-General of Inland Revenue, [1979] A.C. 676 (PC)

After referring to dicta in the Salisbury House case, [1930] A.C. 432 to the effect that the letting of land does not constitute a "trade", Lord Diplock noted that the word "business" in the Malayan Income Tax Act 1967 was broader (p. 684):

"'Business' is a wider concept than 'trade'; and in the Hanover Agencies case [1967] 1 A.C. 681 the Board uttered a warning against seeking to apply these dicta outside the narrow context of British income tax law and in particular that of Schedule D ... The carrying on of 'business,' no doubt, usually calls for some activity on the part of whoever carries it on, though, depending on the nature of the business, the activity may be intermittent with long intervals of quiescence in between."

Words and Phrases

Wisdom v. Chamberlain (1968), 45 TC 92 (C.A.)

In finding that a gain resulting from the purchase of silver by the U.K. taxpayer in order to hedge against a devaluation of the pound was taxable, Harman L.J. stated:

"In the first place, it seems to me that, supposing it was a hedge against devaluation, it was nevertheless a transaction entered into on a short-term basis for the purpose of making a profit out of the purchase and sale of a commodity, and if that is not an adventure in the nature of trade I do not really know what it is. The whole object of the transaction was to make a profit."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Commodities, and commodities futures and derivatives purpose for silver purchase was to profit from devaluation 184

Guinea Airways Ltd. v. Federal Commissioner of Taxation (1949), 83 C.L.R. 584 (HC of A.)

Before finding that a stock of spare parts held in order to meet possible future emergencies were capital assets rather than stock in trade, Kitto J. stated (p. 593):

"In the case of a banker, money is his stock in trade, and any profit or loss he makes in dealing with money in the course of his business is on revenue account, notwithstanding that the money is in a sense held in reserve. In a case such as the present, however, money is not stock in trade, and neither are spare parts and stores bought with it; and if either money or goods be lost while held as a fund or stock to meet future needs, the loss is a loss on capital account".

Martin v. Lowry, [1926] K.B.D. (C.A.)

A venture in which a wholesale machinery merchant purchased in 1919 the whole surplus stock of government aircraft linen remaining in the government's possession and then set up a large and skilled organization for disposing of the linen in smaller quantities over the following eight months, was found to be a trade, business or adventure.

Administrative Policy

11 October 2019 APFF Roundtable Q. 17, 2019-0812761C6 F - Entreprise - Business

Stewart as the leading case on “business”

Based on the Act, technical interpretations and the jurisprudence, it is difficult to ascertain what constitutes a business. Could CRA provide guidance on its interpretation of “business”?

After indicating that the s. 248(1) definition of business was “intended to clarify and extend the ordinary meaning of the word ‘business’," CRA stated:

Stewart considered how to determine whether or not there is income from a source for the purpose of section 9. In that context, it provided guidance that can also be used to determine whether or not a business exists.

Because Parliament and the courts have given "business" a very broad meaning, the CRA does not intend to give specific guidance.

Ultimately, the question of whether the activities of a taxpayer constitute a "business" remains a question of fact … .

S3-F9-C1 - Lottery Winnings, Miscellaneous Receipts, and Income (and Losses) from Crime

Gambling profits


Profits derived from bookmaking or from the operation of any gambling establishment (carried on legally or otherwise) constitute income from a business. It is clear from various decisions of the courts that earnings from illegal operations or illicit businesses, such as illegal gambling and fraudulent business schemes, are not exempt from tax. See for example, the decisions in The Queen v. Poynton, [1972] CTC 411, 72 DTC 6329 (Ont. C.A.) and MNR v. Eldridge, [1964] CTC 545, 64 DTC 5338 (Ex. Ct.). …


Usually the frequency and systematic nature of an activity would be indicative of a business. In addition to the definition of business in subsection 248(1) of the Act, the traditional common law definition of business is "anything which occupies the time and attention and labour of a man for the purpose of profit", see Smith v. Anderson, (1880) 15 Ch. D. 247. More recently, the Tax Court of Canada went on to state that:

… Gambling - even regular, frequent and systematic gambling - is something that by its nature is not generally regarded as a commercial activity except under very exceptional circumstances. Leblanc v. The Queen, 2006 TCC 680, 2007 DTC 307.


…[T] he following criteria should be considered in making the determination [of business]:

  • the degree of organization that is present in the pursuit of this activity by the taxpayer,
  • the existence of special knowledge or inside information that enables the taxpayer to reduce the element of chance,
  • the taxpayer's intention to gamble for pleasure as compared with any intention to gamble for profit as a means of gaining a livelihood, and
  • the extent of the taxpayer's gambling activities, including the number and frequency of bets.

3 March 2011 External T.I. 2010-0379181E5 F - Jeux de hasard sur Internet

on-line poker winnings would be non-taxable if absence of conduct of serious business person

Respecting the taxability of a taxpayer’s winnings on poker games played over the internet, CRA referred to Leblanc, and stated:

According to Chief Justice Bowman, barring exceptional circumstances, although the activities surrounding gambling are invariably undertaken to make a profit, the fact remains that those activities have a personal element.

Thus, in such cases, gambling activities can only be considered as a business if they are carried on in a sufficiently commercial manner. For an activity to be characterized as commercial by nature, the taxpayer must have the subjective intent to make a profit and there must be evidence of the conduct of a serious business person supporting that intention.

The CRA summary stated: " Generally such activities will not be a source of income. "

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 3 - Business Source/Reasonable Expectation of Profit on-line poker winnings generally non-taxable 22

31 January 2007 External T.I. 2006-0213111E5 - RRIF TRUST - CARRYING ON A BUSINESS

After stating that "it is our general view that any undertaking or activity of a taxpayer that is carried on for profit or with a reasonable expectation of profit would be viewed as carrying on a business", the Directorate indicated that "it would appear that a RRIF that engages in a securities lending practice for a fee would likely be considered to be carrying on a business".

Policy Statement CPS-019 "What is a Related Business?" 31 March 2003

Although most fundraising activities are business activities, a fundraising event generally will not be considered to "recur with such regularity and frequency that it amounts to carrying on a business" (para. 12).

1996 A.P.F.F. Round Table No. 7M12910 (Item 4.1.1)

Discussion of the distinction between a business and an adventure in the nature of trade.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 10 - Subsection 10(1) 15

8 March 1990 T.I. (August 1990 Access Letter, ¶1379)

Engaging in an adventure in the nature of trade is not ipso facto carrying on a business.

89 M.R.T. - Q.15 (Jan. 90 A.L.)

In determining whether term deposits of a corporation which are required as collateral to obtain a line of credit are used in an active business, RC will consider the criteria illustrated in the Ensite case and will also consider the length of the term of the deposit, the reasonability of the amount involved, the necessity of the investment and the alternatives that could have existed.


Krishna, "What Constitutes a Business?", Canadian Current Tax, June 1995, Vol. 5, No. 9, p. 90.