| 19(1) | File No. 5-9581 |
| J.E. Harms | |
| (613) 957-2109 |
April 5, 1990
Dear Sirs:
Re: Qualified small business corporation share Small business corporation Assets used in an active business Request for a technical interpretation
This is in reply to your letter of February 9, 1990 in which you requested our opinion with respect to the meaning of the phrase "assets that were used in an active business" in the definition of small business corporation" in subsection 248(1) of the Income Tax Act (the "Act").
In particular, you requested confirmation that the policy of Revenue Canada, Taxation as set out in paragraph 5 of Interpretation Bulletin IT-486R, namely, that an asset is considered to be used in a business if its primary or principal use (i.e. more than 50% of its use) is in respect of that business, applies for the purposes of the definition of "qualified small business corporation share" in subsection 110.6(1) of the Act.
In response to Question 11 of the Revenue Canada round Table Foundation, we stated that we are reviewing our policy to determine whether or not the above position is appropriate for the purposes of section 110.6 of the Act. As indicated to you in our telephone conversation of April 2, 1990 (Harms 19(1) our position is still under review and we are therefore unable to provide you with any definitive response at this time.
You also requested our comments as to whether the test regarding the use of assets is applied on an asset-by-asset basis or on the basis of a class of assets. In our view, the primary use test set out in paragraph 5 of Interpretation bulletin IT-486R, to the extent that it is determined to be applicable, should be applied on an asset-by-asset basis.
The foregoing comments are provided in accordance with the practice described in paragraph 24 of Information circular 70-6R issued by Revenue Canada, Taxation dated December 18, 1978.
Yours truly,
for DirectorReorganizations and Non-resident DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch