A husband and wife own shares of various corporations, each with its own business, and both work on a full-time basis (i.e., over 20 hours collectively) for the various companies, but with no particular company’s business requiring more than 4 hours a week of work on average. Can the hours worked by each spouse in the various businesses be added together for the purpose of applying the s. 120.4(1.1)(a) deeming rule? CRA responded:
Since neither spouse works more than 4 hours in any business carried on by any of the particular corporations they own, the requirements of the bright line test in paragraph 120.4(1.1)(a) would not be met and, as such, it remains a question of fact as to whether either spouse would otherwise be considered to be actively engaged on a regular, continuous and substantial basis in the activities of each such business on the basis of the limited number of hours worked. …
… 2019-0799901C6 … and … Example 9 of … Guidance on the Application of the Split Income Rules for Adults provide useful general guidance … . In particular … 2019-0799901C6 … indicated that a husband and wife could both be considered to be actively engaged in the activities of a particular business carried on by their corporation on a regular, continuous and substantial basis for a particular year where the particular business did not require any other workers and only required them to spend on average 5 hours each per week in that business.