| 19(1) | File No. 5-8995 |
| M. Eisner | |
| (613) 957-2138 |
February 2, 1990
Dear Sirs:
This is in reply to your letter of October 27, 1989 concerning "assets used in an active business" for the purposes of the definition of "small business corporation" in subsection 248(1) of the Income Tax Act.
In your letter, you appear to have provided information related to an actual situation which will involve proposed transactions. As explained in Information Circular 70-6R dated December 18, 1978, it is the Department's practice not to comment on such transactions other that in the form of an advance income tax ruling. However, we are making the following general comments which we hope will be of assistance to you.
As indicated in paragraph 5 of Interpretation Bulletin IT-486R, it is a question of fact whether an asset is used in an active business. That paragraph also indicates that the Department considers that an asset is used in a business if its primary or principal use (i.e. more than 50% of its use) is in respect of that business. Therefore, the entire value of an asset (including an asset such as a building) would be included with respect to the "all or substantially all" requirement where the 50% test is satisfied.
We also note that the above position is currently under review for the purpose of determining whether it should continue to be applicable for the purposes of section 110.6 of the Income Tax Act.
These comments represent our opinion of the law as it applies generally. As indicated in paragraph 24 of Information Circular 70-6R dated December 18, 1978, this opinion is not a ruling and, accordingly, it is not binding on Revenue Canada, Taxation.
We trust you will find the foregoing satisfactory.
Yours truly,
for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch