From 2001 to 2006 inclusive, Ms. B was employed 40 hours per week in the active business of Opco (wholly owned by Mr. A), then ceased working. In 2018, Mr. A and Ms. B (now both 35) married and Ms. B acquired non-voting shares of Opco (while continuing to do no work for it). Is her dividend income an “excluded amount” because “excluded business,” para. (b) exception based on her previous employment? CRA responded:
[T]here is no requirement that the prior taxation years where the specified individual is actively engaged on a regular, continuous and substantial basis must be consecutive, nor is there a requirement that the specified individual must be related to the particular source individual at the time such qualifying activities are performed. … [and] these years can be before the effective date of the amendments to section 120.4. …
[A]ssuming Ms. B has been actively engaged on a regular, continuous and substantial basis in the business activities of Opco for at least five years, the five-year test in paragraph (b) of the definition of “excluded business” would appear to be met.