CRA recently ruled that where a spouse worked in a company before he or she married the principal shareholder, the work that the spouse put in before marriage counts in assessing whether TOSI applies.
In this particular ruling, the spouse, Ms. B, worked as a full-time employee in Opco for approximately 40 hours per week from 2001 to 2006. Opco is owned by Mr. A. Ms. B stopped working in 2007. In 2018, she married Mr. A. After marriage, Ms. B acquired non-voting shares of Opco. Opco paid a dividend to Ms. B. The question was whether the TOSI rules apply to the dividend that Ms. B received.
CRA ruled that Ms. B should qualify for the “excluded business” exemption on the basis that Ms. B was actively engaged in Opco’s business in any five years. Most importantly, CRA confirmed that there is no requirement that the specified individual (i.e., Ms. B) must be related to the source individual (Mr. A) at the time the services are performed.
