The CRA confirmed that multiple businesses run by a husband and wife where they work fewer than 20 hours per week in each business would not be “excluded businesses” under the “bright line test” for substantial involvement. The CRA wrote the following:
Whether an individual has been actively engaged in the activities of a business on a “regular, continuous and substantial basis” in a particular year will depend on the circumstances, including the nature of the individual’s involvement in the business (i.e., the work and energy that the individual devotes to the business) and the nature of the business itself. The more an individual is involved in the management and/or current activities of the business, the more likely it is that the individual will be considered to participate in the business on a regular, continuous and substantial basis. Likewise, the more an individual’s contributions are integral to the success of the business, the more substantial they would be. Therefore, such a determination will depend on the facts and circumstances specific to each particular situation.
STEP Round Table 2022, question 8, summarized in Tax Topics no 2657 (February 7, 2023)
