Principal Issues: [TaxInterpretations translation] Do the different centres owned by a corporation represent separate businesses?
Position: In this situation, we are of the view that it is highly likely that each centre does not represent a separate business.
Reasons: The centres offer the same range of services to clients, under similar rules and terms, so there is a high degree of correlation and intertwining. It appears that the corporation is running the same business through two or more operations in multiple locations, as with a bank or any other business that has multiple branches.
September 30, 2004
Ms. Ginette LaRoche Headquarters
Montreal Tax Services Office Sylvie Labarre, CA
(613) 957-89532004-008330
Dear XXXXXXXXXX,
This is further to your fax of June 28, 2004 in which you asked for our opinion on whether XXXXXXXXXX (the "Corporation") had one or more separate businesses.
Facts
XXXXXXXXXX
Question
You wish to know whether, for the purposes of the Income Tax Act, the XXXXXXXXXX represents a separate business from the XXXXXXXXXX due to the fact that each of the Centres owned by the Corporation has a separate franchise number.
Our Comments
As noted in paragraph 2 of Interpretation Bulletin IT-206R, whether the carrying on of two or more simultaneous business operations by a taxpayer is the same business is dependent upon the degree of interconnection, interlacing or interdependence and the extent of the unity embracing the business operations. Paragraph 3 of that Bulletin refers to a series of factors that may be relevant in this determination including, inter alia, the extent to which the two operations have factors in common such as processes, products, customers, services offered to customers, and types of inventory. Having the same management for the operations could also be one of the factors to consider.
The jurisprudence can also assist us in making this determination. In Canadian Dredge and Dock Corporation Limited v. MNR, T.R.B. (81 DTC 154), the taxpayer carried on a marine construction business in the Maritimes and Ontario. The judge indicated that it is necessary to distinguish between the "business" of a corporation and the various operations by which the corporation carries on the business. The judge found, in that case, that the taxpayer was carrying on a business through two operations, one located in Ontario and the other in the Maritimes, and that it was normal in the marine construction business to have operations in various parts of the country.
There is also the case of Merchants Distributors Limited v. MNR, T.A.B. (69 DTC 803), in which a wholesaler who sold to retailers decided to open a retail shop in addition to its wholesale business. The judge found that the retail shop was an expansion of a single business and that the intermingling and interdependence was so great that the two facets constituted a single business engaged in two operations with different methods, for the purpose of earning income from the same business.
Furthermore, in Robert M. Randall v. MNR, S.C.C. (67 DTC 5151), the taxpayer operated a business managing horse racing operations and horse race tracks in British Columbia. The taxpayer also began conducting horse racing business and transactions for a Portland, Oregon association. The judge found that the entire operation, whether located in British Columbia or Portland, was in effect a single business. He also stated that the income of this business from various geographical bases was income of the business considered as a whole in the same way as would be the business of a bank or any other business that has branches in several locations.
Thus, in the present situation, we are of the view that the fact that the Corporation has a separate franchise for each of its Centres is not in itself sufficient to conclude that the Corporation's Centres are separate businesses.
Furthermore, the fact that each of the Centres offers the same range of services to clients, under similar rules and terms, is a most relevant factor in determining that the Corporation's Centres do not represent separate businesses. We could also argue, based on the information provided in your letter, that the XXXXXXXXXX was merely an expansion of the Corporation's business, that the Corporation is carrying on the same business with two or more operations, located in multiple locations just as a bank or other business would have multiple branches.
In this situation, based on the information available in your application, we would be inclined to conclude that the Corporation's Centres do not constitute separate businesses.
For your information, unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, the electronic library version can be provided. Alternatively, the client may request a severed copy using the Privacy Act criteria, which does not remove client identity. Requests for this latter version should be made by you to Ms. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.
We hope you find these comments of assistance. Should you require any additional information regarding the content of this document, please do not hesitate to contact us.
Ghislaine Landry, CGA
for the Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch