Two related corporations (Holdco 1 and Holdco 2) were equal participants in a joint venture and Opco (owned by them on a 50/50 basis) earned all its revenues from providing services to the joint venture. Holdco 1 and Holdco 2 had both experienced a revenue decline, but neither had applied for the CEWS.
CRA indicated that, based on para. (d) of the qualifying revenue, Opco did not derive any qualifying revenue from the joint venture (i.e., from Holdco 1 and Holdco 2), so that s. 125.7(4)(c) was not available. However, its non-arm’s length relationship with Holdco 1 and Holdco 2 would not preclude it from effectively accessing their qualifying revenue declines through a joint election under s. 125.7(4)(d). CRA stated:
… [I]t appears that the requirements to use the rule in paragraph 125.7(4)(d) could be met since all of Opco’s revenue would be considered to be derived from persons with which Opco does not deal at arm’s length (the participants of the joint venture, Holdco 1 and Holdco 2).