The corporate taxpayer was forced to sell its broadcasting division and invested the proceeds in short-term securities while seeking a new business to purchase.
The taxpayer actively managed this investment portfolio and claimed the interest earned as income from an active business to calculate its Canadian manufacturing and processing profits deduction.
The Minister reassessed the income as property income.
The Supreme Court of Canada allowed the taxpayer's appeal, applying a rebuttable presumption that income earned by a corporation in pursuit of its corporate objects is business income, and finding that the taxpayer's extensive investment activities constituted an active business.
