| April 11, 1990 | |
| Registrations Directorate | Specialty Rulings |
| Directorate | |
| C. Juneau, A\Director | |
| Charities Division | File No. 7-3857 |
SUBJECT: Establishment of Trust 24(1) - Application of General Anti- Avoidance Rule
In the memorandum of April 25, 1989 from L.A. Rondeau of Charities Division, we were asked to consider whether the establishment of a trust by 24(1) You are concerned that the 24(1) would constitute the carrying on of business that is not a related business of the 24(1) with the result that the registration of the could be revoked under paragraph 149.1(3)(a) of the Act. This concern could be avoided if a trust were established by the 24(1)
We assume, for the purposes of this memo, that 24(1) would constitute the carrying on of a business by the 24(1) there could be commercial arrangements where the activities of the 24(1) would not amount to the carrying on of a business. In these cases, the issue of related business and the application of paragraph 149.1(3)(a) of the Act would not arise.
In our opinion, the 24(1) would constitute the carrying on of a related business. See Alberta Institute on Mental Retardation v. The Queen, 87 DTC 5306 (F.C.A.). In that case the Majority of the Federal Court of Appeal held that a business carried on by a public foundation would be a related business of that charity where the whole of the income from the business is used for the charitable purposes of the Foundation.
Although the business in the Alberta Institute case consisted of the solicitation and sale of used household items, the principle enunciated by the Court is of general application. It should be followed in those cases in which all the income of the charity is used for its charitable purposes. In the 24(1) In these circumstances, where the activities of the 24(1) are in accordance with the intent of the law as determined by the Court, section 245 of the Act would not apply.
The question of the application of section 245 may arise in other cases where net income of the business is not used to further the charitable objects of the organization. These cases should be considered on their own facts.
21(1)(b)
M.A. Hiltz for Director GeneralSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch
c.c.: Barbara DarlingR.J.L. Read