Microsoft Must be held accountable.

[Henry Spencer]

On Mon, 13 Oct 2003, Fraser Campbell wrote:
> > ... *provided* the Feds believe that your business is legitimate
> > and is truly intended to earn a profit.  This is an area which has seen
> > many abuses, so any business which makes losses, year after year, that
> > are then deducted against employment income, had better have a really
> 
> I believe that "reasonable expectation of profit" is no longer a valid test 
> for CCRA.  There was a supreme court ruling on May 23, 2002 that says "Where 
> the nature of an activity is clearly commercial, there is no need to analyse 
> the taxpayer's business decisions".

Careful here.  If I remember that ruling correctly, the issue there was
lack of profits rather than lack of reasonable expectation of profit. 

The question was whether CCRA could claim that something which sure looked
like a business really wasn't, because it never earned a profit and, on
close inspection, seemed unlikely ever to.  The answer was that an inept
businessman is still a businessman, and the fact that he never succeeded
didn't mean he wasn't trying.  This didn't change the fundamental
"reasonable expectation of profit" definition of business, it just slapped
down an attempt to be overly narrow about what's "reasonable". 

Note that I didn't say you were in trouble if your business lost money
year after year.  I said you were in trouble if it lost money year after
year *and* you couldn't make a convincing argument that it's really a
business.  An occasional profit is the best argument, but it's not the
only one; however, you do need something.  Just declaring your basement
model railroad to be a business doesn't make it one. 

> So you can lose money ad-infinitum ... 

*If* you are "clearly commercial".  That, if you *do* have that convincing
argument that it's really a business despite continuing losses.  Good luck
convincing a court that the model railroad meets that criterion. 

> this is from "The 10 Secrets Revenue Canada Doesn't Want You To Know" by 
> David Voth (2002 edition).

Mr. Voth conceivably might have commercial motives for exaggerating the
significance of that court decision.

Consult an expert before doing anything rash. 

                                                          Henry Spencer
                                                       henry-lqW1N6Cllo0sV2N9l4h3zg at public.gmane.org

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