In the definition of excluded shares, subpara. (a)(i) refers to 90% of the corporation’s "business income" whereas para. (c) uses "all or substantially all of the income". Does “income” refer to net income? If yes, does this require a segmented computation of business income as between income from services and from other sources?
CRA indicated that the references to “business income” and “income” in paras. (a) and (c) respectively both generally mean gross income. Thus, subpara. (a)(i) of that definition requires that less than 90% of business income of the corporation was from the provision of services.
Where the corporation has income from the provision of services and from income from non-services, the two should generally be computed separately, and the non-service income considered in determining if the requirement of the definition is met. However, where the non-service income was necessary for or incidental to the provision of the services themselves, all of the income would be considered to be services income.