A business is carried on through a corporation owned by husband and wife, who each contribute 5 hours per week of time to the business. Is the business an excluded business?
CRA noted that whether an individual has been “actively engaged on a regular, continuous and substantial basis in the activities of the business” (“actively engaged”) will depend on the circumstances, including the nature of the individual’s involvement in the business, i.e., the work and energy that the individual devotes to the business and the nature of the business itself – so that, the more an individual is involved in the management and/or current activities of the business, the more likely it is that the individual will be considered to be actively engaged.
After further noting that the facts here were similar to Example 9 of CRA’s split-income guidelines, CRA indicated that in the current scenario, both the husband and wife could be considered to be actively engaged in the business, even though neither of them reaches the 20-hour threshold in s. 120.4(1.1)(a).
It was a question of fact whether the husband and wife could be considered to satisfy the excluded business test for a particular year or continue to meet such test thereafter, as consideration must be given to the ongoing nature and labour requirements of the corporation’s business.