| 24(1) | File 903117 |
Q.4 Active Business Income
Has Revenue Canada, in light of the decision of the Supreme Court of Canada in Canadian Marconi Company v. The Queen (1986), 86 DTC 6526, formed an assessing policy with respect to the classification of interest income as income from property or income from an active business?
Department's Position
The Marconi decision confirms the validity of the traditional rebuttable presumption that any income derived by a corporate taxpayer from any activity it was incorporated to carry on is income from a business. The Court in Marconi considered such factors as the time and effort expended on purchasing investments and the large scale of investment activity of the taxpayer in determining that the income from the investments was income from an investment business. The fact that the funds invested by the taxpayer in Marconi were derived from the sale of capital assets and the fact that they were being set aside for the purchase of new capital assets were not considered relevant in the determination of whether the interest income there from constituted income from property or income from a business.
The question whether interest income of a corporate taxpayer is income from a business or income from property remains a question of fact that must be determined having regard to all of the relevant circumstances and, in the absence of sufficient evidence to offset the presumption, will be determined by the presumption.
It should be pointed out that the relevance of the Marconi decision has been limited by the changes made to the Act under which income from a business that is a "specified investment business" as defined in paragraph 125(7)(e) is excluded from active business income and is deemed to be income from property for the purposes of the definition of "Canadian investment income" in paragraph 129(4)(a).
Reference should be made to Interpretation Bulletin IT-73R4 dated February 13, 1989 for our general comments regarding income from an active business.
Prepared by: Jake E. Harms
November 9, 1990