A husband and wife owning a number of corporations, each of which has its own business and full-time staff, work on a full-time basis for the various companies (whose shares are not excluded shares), but do not work for any particular company at least 20 hours a week. Would dividends above a reasonable amount be subject to the tax on split income (“TOSI”)?
After confirming that neither spouse would thus satisfy the 20-hour test in s. 120.4(1.1)(a), CRA turned to the “excluded business” safe harbor (before going on to make general comments on the reasonable return exclusion), and stated that: the application of this test in a particular year will depend on the circumstances, including the nature of the individual’s involvement in the business (e.g. the work and energy that the individual devotes to the business) and the nature of the business itself; the greater the involvement in the management or current activity of the business, the more likely it is that the individual will be considered to participate in the business on a regular, continuous and substantial basis; and the more an individual’s contributions are integral to the success of the business, the more substantial they would be.