In a technical interpretation (TI 2019-0814181E5, August 19, 2019), the CRA confirmed that the five-year test to qualify for the “excluded business” exception under the TOSI (tax on split income) rules should take into account all taxation years in which a taxpayer is involved in a business, regardless of whether the business was previously carried on in another form.
What happens where Opco A and Opco B amalgamate, Amalco carries on the businesses carried on by each of the predecessors but a spouse (“spouse B”) was involved in only one of the businesses?
In that case, Amalco must maintain separate books and records for each business, and the taxpayer must maintain documentation adequate to allow the tracing of funds from each business to the payment of dividends to determine whether the dividend is an excluded amount for spouse B.
Good luck with that.
Dino Infanti, “The ‘Excluded Business’ Exception to TOSI: Reorganized Businesses” (January 2020) 20:1 Tax for the Owner-Manager
