A specified individual, who holds only 5% of the shares of Aco has however been “actively engaged on a regular, continuous and substantial basis” (“Involved”) in the active business of Aco (which is run by her husband) for 2017 through 2019, so that the dividends received by her on her shares of Aco were excluded amounts and, thus, not subject to the tax on split income. If throughout 2020 she were absent from any work because of a maternity leave or temporary (or permanent) disability, would her dividends still be excluded amounts?
CRA indicated that, indeed, the excluded business exception from TOSI would be unavailable in 2020 because she had no involvement in the business. (CRA implicitly found that she could not rely in that year on para. (b) of the excluded business definition, because she had only been Involved for a total of three rather than five prior taxation years.)
CRA went on to indicate that the reasonable return exception might be available, noting that any application of this exclusion would be:
based on the specific criteria applicable in the circumstances, including the work performed, the property contributed, the risks assumed, the total amounts paid or payable and such other factors as may be relevant.