ABC Co., which was wholly-owned by a family trust, of which Mr. and Mrs. A (both over 24) are beneficiaries, carried on a trucking business in which both were actively engaged on a regular, continuous and substantial basis throughout the many years of operation. The proceeds of the sale of this business in 2018 were used to establish an investment business in which only Mrs. A is active. Will the excluded business exception apply to Mr. A, notwithstanding that the trucking business has ceased?
CRA noted that the investment business is a related business in respect of Mr. A, a specified individual, since Mrs. A, a source individual, is actively engaged in the activities of ABC Co.
The investment business directly carried out by ABC Co. is clearly not the same business as the former trucking business. Any taxable dividends that Mr. A receives are considered to be derived directly or indirectly from such investment business. As he is not actively engaged in that business, the amount will not be an “excluded amount” under (b)(ii) of that definition, because such amount will not be “derived directly or indirectly from an excluded business” of Mr. A “for the year.” Those are the key words.
Consequently, the taxable dividend received by Mr. A, will be subject to TOSI (unless another excluded amount exception applies).