After a husband and wife’s corporation (in whose business they had worked full time for 5 years) has sold its business and reinvested the proceeds, they receive dividends out of the resulting investment income generated. Assuming that the exception for “excluded shares” did not apply, would the dividends be split income, because the definition of “excluded business” could no longer be met because the business had ceased?
CRA noted that the corporation’s investment activities might be a new business that is a related business, and stated that, in such case:
[T]he excluded business exception would not apply to husband and/or wife if such individual is not considered to be actively engaged in that investment business on a regular, continuous and substantial basis either during the particular taxation year or in any five prior taxation years. Consequently, the taxable dividends will be split income subject to TOSI unless another excluded amount exception applies.