An individual, a pharmacist, operates a pharmacy at a profit but also, as part of the same business, has a commercial department which sells other products generating a loss, but with that commercial division helping to generate revenues for the pharmacy department. If he drops the pharmacy department down into a newly-incorporated corporation and continues to operate the commercial department directly at a loss, could the reasonable expectation of profit doctrine be applied to deny such losses? CRA responded:
[T]he CRA's general position on the "reasonable expectation of profit" test is to apply it only in determining whether a taxpayer has a source of income within the meaning of the Act where the activity in question involves a personal or hobby element. Where there is no personal element to the business activity in question, as appears to be the case in the Particular Situation, this test will generally not be applied.