Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Would a CCPC's earning of income from fees charged for the use of its Automatic Teller Machines be excluded from qualifying as a qualifying active business within the meaning assigned by subsection 5100(1) of the Regulations because it is considered to be income from property?
Position: Probably not.
Reasons: We would generally conclude that the earning of fees from the use of the Automatic Teller Machines would not be excluded under paragraph (1) of the definition of "qualifying active business".
January 27, 2000
VANCOUVER ISLAND TSO HEADQUARTERS Bruce Donaldson M.P. Sarazin Acting Director (613) 824-5441
Attention: Gord Brown 2000-000078
Qualifying Active Business and Automated Teller Machines
We are writing to you in response to your facsimile dated January 7, 2000, wherein you requested our comments regarding the determination of whether income derived from fees charged for the use of Automated Teller Machines ("ATMs") would be considered income from property and excluded under paragraph (a) of the definition of "qualifying active business" in subsection 5100(1) of Income Tax Regulations (the "Regulations").
Comments
Whether or not a business is a qualifying active business within the meaning of subsection 5100(1) of the Regulations is a question of fact which can only be determined after a review of all of the relevant information.
A "qualifying active business" is defined in subsection 5100(1) of the Regulations and generally includes any business which is carried on primarily in Canada except where the principal purpose of the business is to earn income from property including interest, dividends, rent and royalties or gains derived from dispositions of property (other than inventory). A qualifying active business may, however, include a business of leasing property other than real property.
Where a corporation owns, services and maintains its Automated Teller Machines, we believe that a strong case could be made that the corporation's business is not one the purpose of which is to earn income from property. This determination would require a review of all of the facts and the degree of activity carried out by the corporation. Where the conditions described in (b), (c) and (d) of the definition of qualifying active business are satisfied and you have concluded that there is enough activity carried out by the corporation to support the existence of a business, we would support a conclusion that the principal purpose of earning income from fees charged for the use of the corporation's ATMs would not be considered a principal purpose of earning income from property. Furthermore, in our view, the inclusion in the definition of "qualifying active business" of a business of leasing property other than real property in paragraph (a) would support this position. We note that there is no indication in your memo that the corporation is "leasing" the ATMs and earning income in this fashion; if this were the case, the business would more clearly qualify within the definition.
Where the corporation does not service and maintain its Automated Teller Machines, it might be difficult to characterize the income as other than from property. Where this is the case, we would conclude that the income would not be from a qualifying active business.
In making this determination, we would refer you to IT-459 and IT-73R5 which provide the Canada Customs and Revenue Agency's general views relating to the existence of a business and an active business as those terms are used in other sections of the Income Tax Act.
We trust these comments will be helpful.
Patricia Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy & Legislation Branch