Words and Phrases - "used in ... carrying on business"

An eligible entity (ACo) acquired from a non-arm’s length corporation (BCo) all machinery, infrastructure, contracts, goodwill, real property, and inventory relating to a division operated by Bco (the Division Assets). Property retained by BCo included life insurance policies, a building, intercompany loans and investments in related parties (the “Other Assets”) that were not used to operate the Division. Would the Other Assets be considered in ascertaining whether the Division Assets met the all or substantially all test in s. 125.7(4.1)(b)(i)?

After noting that, under Ensite, “[i]f the withdrawal of the property would have a decidedly destabilizing effect on the corporate operations, the property would generally be considered to be used in the course of carrying on a business,” CRA stated:

[W]here the Other Assets were employed and risked in BCo’s business such that their withdrawal would have a decidedly destabilizing effect on BCo’s operations, such assets must be considered when ascertaining whether, immediately prior to the acquisition by ACo, the fair market value of the Division Assets constituted all or substantially all of the fair market value of the property of BCo used in the course of carrying on business under subparagraph 125.7(4.1)(b)(i).