An individual, a sole shareholder of a corporation, borrows money in order to earn business or property income. To secure his personal loan, his corporation grants a mortgage on a building it owns. The shareholder makes all principal and interest payments on his loan, and also pays his corporation a reasonable fee for the grant of the security (a “guarantee fee”).
Regarding whether the fee would give rise to income from property or a business to the subsidiary, CRA stated that it “generally considers that [a] guarantee fee is received for a service,” that Timmins held that “the provision of services under contract for a fee may be a business within the meaning of subsection 248(1) by virtue of being an undertaking of any kind whatever,” and that whether a business was carried on (i.e., there was an ongoing conduct or carriage of the business) was a question of fact.