The taxpayer's director ("Mr. Gitman") and his two sisters inherited equal interests in a number of rental properties and a business, which they held in a "de facto partnership." The partnership's properties and business were managed principally by the taxpayer, which was owned, operated and staffed solely by Mr. Gitman, in consideration for an annual fee of $150,000. The partnership was its only client. The taxpayer claimed small business deductions in three consecutive taxation years. The Minister denied the deductions on the basis that the taxpayer's management activities were a "personal services business" under s. 125(7), and therefore it was not engaged in an "active business carried on by a corporation."
Bédard J. affirmed the Minister's position. But for the existence of the taxpayer, Mr. Gitman would have been working directly for the partnership in a function that was an "office," given that he held "a subsisting , permanent, substantive position which had an existence independent of the person who filled it" for which he "was entitled to a fixed remuneration" (para. 48). Although it was "well established that a partner cannot be an employee in his own partnership" (given that the control of a partner in the partnership business is inconsistent with the subordinate character of the employment relationship) (para. 27), the same restriction did not apply here as "an 'office' ... does not require the individual to be in the service of some other person" (para. 28).