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. A second corporation held vacant land in Canada and, in order to resell it, it must do filling, logging, soil remediation, waterworks, roads and lot subdivisions.
In each case, would such land be considered to be an asset used principally in an active business “carried on” by the corporation for purposes of the definition of "qualified small business corporation share"? CRA 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 … .
Regarding the second situation, it 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. Subject to a review of all the facts relevant to the first situation presented, this may be the case for the first corporation. If that were the case, the vacant land held by that 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 of "qualified small business corporation share" in subsection 110.6(1).