Words and Phrases - "carried on business"
20 July 2004 External T.I. 2004-0062031E5 F - Actif utilisé dans entreprise exploitée activement
A corporation owned a large area of vacant land in Canada (for instance, in an industrial park) and, as the corporation wished to locate in the park, it subdivided and sold portions of the vacant lot, which was its only activity. In finding that this would not constitute carrying on business for purposes of the definition of "qualified small business corporation share," CRA first quoted the statement in IT-459, para. 3 that:
Although an adventure or concern in the nature of trade is included in the definition of the term "business" in section 248, it does not necessarily mean that a taxpayer who is engaged in an adventure or concern in the nature of trade is "carrying on" a business or has "carried on" a business.
It then stated:
[A] corporation would not be carrying on a business where the purchase and sale of land are isolated or infrequent events, are not related to the other activities of a business carried on by the corporation, and where the activities are minimal or required solely to facilitate the sale. … If that were the case, the vacant land held by [the first] corporation would not be assets used principally in an active business carried on primarily in Canada by the corporation for the purposes of the definition … .
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - 101-110 - Section 110.6 - Subsection 110.6(1) - Qualified Small Business Corporation Share - Paragraph (c) - Subparagraph (c)(i) | vacant land not used in carrying on a business if merely subdivided and sold | 325 |
| Tax Topics - Income Tax Act - Section 125 - Subsection 125(7) - Active Business Carried On by a Corporation | an adventure is a business for s. 125(1) (but not 110.6) purposes even if it is not carried on | 148 |
Timmins v. R., 99 DTC 5494, [1999] 2 CTC 133 (FCA)
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 p. 5498) 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 (p. 5500).
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Business | N.B. government had a servicing undertaking, i.e., a business | 169 |