The sole business activity of a Canadian-controlled private corporation (the “Corporation”) was to build a small utility-scale solar array on bare land and sell the electricity that was generated to a local utility service under the terms of a long-term contract. It hired approximately 5 part-time employees to run the solar panel electricity generating business. After referring to the specified investment property rules, CRA stated:
[I]ncome from property would generally mean the production of revenue from the use of such property that generates income without active and extensive business-like intervention. In other words, income from property is derived from the mere ownership of such property without a significant commitment of time, labour or attention (such as income from interest, dividends, rents and royalties). On the other hand, income from a business requires organization, systematic effort, and a certain degree of activity.
If the course of conduct of the Corporation indicates that the income is produced with active and extensive business-like intervention, and the nature or legal character of the business transactions supports that, then the Corporation could be considered to derive income from a business rather than income from property. Consequently, where the principal purpose of the business carried on by the Corporation is not to derive income from property, any gains or losses from the business may be considered "income of the corporation for the year from an active business" as defined in subsection 125(7) ... .