A Canadian-controlled private corporation (Amalco), which had fewer than five full-time employees and whose principal activity was property rentals, realized a gain from the sale by it of a flipped property, being a housing unit that had been held by a predecessor by amalgamation for about five years, given that the amalgamation had occurred less than 365 days from the closing of the sale. Regarding the availability of the small business deduction for the gain, CRA stated:
Where subsection 12(12) applies to a taxpayer, the taxpayer is deemed to be carrying on a business that is an adventure or concern in the nature of trade in respect of the flipped property. The income of a Canadian-controlled private corporation (“CCPC”) from an active business carried on in Canada for a taxation year generally qualifies for the small business deduction (“SBD”). The definition of "active business carried on by a corporation" in subsection 125(7) includes an adventure or concern in the nature of trade. Thus, we are of the view that income arising from the disposition of a flipped property could be considered income from an active business and be eligible for the SBD subject to the limits and requirements set out in the Income Tax Act, in particular, in section 125.