Definition of 'Active in the Business'


The July 18 proposals have finally been explained in a little more detail. This tip is about the criteria for a family member to be considered to be “active in the business.”

 The concept of “active in the business” has been defined to mean 20 hours of work done for each week that a business was open in a year. Presumably this is an average so that people can take a vacation each year. A seasonal business, say one that is open for 6 months a year, the related person would have to work an average of 20 hours a week for each week of those six months. If the related shareholder has worked 20 hours a week during the past year, then they can be paid a dividend from the business without the dividend being subject to the tax on split income (TOSI) rules. The TOSI rules
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