Business income vs. property income (Taxation)

Question 1

Business income vs. property income (Taxation)

Answer 1

• It is a question of fact whether income is from business or property.
• Capital property is property that provides a long term or enduring benefit
• Disposition of capital property gives rise to capital gains or losses
• Business income will arise from an “adventure or concern in the nature of trade”, determined as follows:
  o Conduct
   How long was the asset held? Have there been similar transactions?
  o Nature of the asset
   Is the asset capable of producing income? Is the asset related to the taxpayer’s ordinary business?
  o Intent
   Did the taxpayer originally acquire the asset with the intention to sell?
• For an individual, business income is generally taxed at a higher rate than capital gain, as only 50% of capital gains are taxable.
• For a CCPC earning less than the SB Limit, capital gain is generally taxed at a higher rate than business income, as the SBD doesn’t apply to capital gains

Reference: ITA 9, 248(1)