The spouse (the “Spouse”) of a professional (the “Individual”) owns non-voting preferred shares of his professional corporation (“XCo”) and works at least 20 hours per week as a part-time receptionist. A comparable part-time receptionist would receive $18,000 per annum in salary. However, Spouse receives an annual dividend of $150,000. Are such dividends excluded amounts?
CRA indicated that if Spouse works for XCo at least 20 hours per week throughout the portion of the year that the business operates, that would satisfy s. 120.4(1.1)(a), and the dividend income received by Spouse would be considered to be an excluded amount because it is derived from an excluded business – so that it would not be subject to the tax on split income.