B C TAX STUDY GROUP ROUND TABLE
Question 6
Can Revenue Canada, Taxation explain the meaning of the phrase "business... the principal purpose of which is to derive income from property" in paragraph 125(7)(e)? What about the phrase "business of deriving gains from the disposition of property" in paragraph (b) of the definition of "qualifying active business" in Regulation 5100(1)? In particular, how can there be a "business" of deriving income from property or of deriving gains from the disposition of property?
Response
The definition of the word "business" in subsection 248(1) of the Income Tax Act is very broad and includes "an undertaking of any kind whatever". The courts have held that where a corporation is incorporated to earn income by doing business there is a general rebuttable presumption that profits arising from its activities are derived from a business. Accordingly, it is conceivable that a corporation which derives its income from property or from gains from the disposition of property (other than inventory) could be considered to be engaged in a business, depending on the nature of its activities.
Prepared by L.A. McCarron-McGuire May 1991 File 7-911246
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