INCOME TAX
Corporations
Appeal from four Tax Court of Canada (T.C.C.) decisions (2004 TCC 375) dismissing Town Properties Ltd.’s appeal on basis not entitled to small business deduction pursuant to Income Tax Act (ITA), s. 125(1), also dismissing individual appellants’s appeals on basis not entitled to enhanced capital gain deduction under ITA, s. 110.6—Issue whether activities of Town Properties falling within definition of “specified investment business” as defined in ITA, ss. 125(7), 248(1)—If Town Properties did not have five full-time employees, then “specified investment business,” not carrying on “active business,” not “small business corporation,” shares not “qualified small business corporation shares,” shareholders of Town Properties not qualifying for capital gains reduction on disposition of shares under ITA, s. 110.6(2.1)—Town Properties earning rental income from commercial office building in City of Victoria—Employing at least six individuals for cleaning services for tenants—Individuals working four hours per day, five days per week, for total of 20 hours—T.C.C. found 20 hours per week not full-time employment for purposes of ITA, s. 125(7)—Appeal dismissed —Application of “specified investment business” as defined in R. v. Hughes & Co. Holdings Ltd. (1994), 94 DTC 6511 (F.C.T.D.), followed in Woessner v. The Queen (1999), 99 DTC 1039 (T.C.C.)—Requirement that taxpayer employ five full-time employees must be analysed in light of object, purpose of “specified investment business”: Lerric Invest-ments Corp. v. Canada (1999), 99 DTC 755); affd [2001] 2 F.C. 608 (C.A.)—Scheme to ensure that certain minimum level of activity prior to allowing corporation small business deductions—Defining “full-time employment” as equivalent to standard number of hours worked in certain industry in certain area where activities take place, as proposed in Ben Raedarc Holdings Ltd. v. The Queen (1997), 98 DTC 1218 (T.C.C.), inconsistent with scheme of ITA—Term “full-time” employment in definition of “specified investment business” used in contra-distinction with “part-time” employment: R. v. Hughes & Co.—Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, ss. 110.6(1) “qualified small business corporation share” (as am. by S.C. 2000, c. 12, Sch. 2, s. 1), (2.1) (as am. by S.C. 2001, c. 17, s. 86), 125(1) (as am. by S.C. 1998, s. 19, s. 145; 2001, c. 17, s. 113), (7) “specified investment business” (as am. by S.C. 1998, c. 19, s. 145).
Baker v. Canada (A-339-04, 2005 FCA 185, Noël J.A., judgment dated 19/5/05, 6 pp.)