How To Ensure Rental Income Within Your Corporation is Active Business Income
How To Ensure Rental Income Within Your Corporation is Active Business Income May 5, 2023 Tax Question: How do you ensure your rental income within
May 5, 2023
Tax Question:
What if the Scientific Research and Experimental Development (SR&ED) project involve staff and resources from multiple corporations?
Facts:
Often times companies join forces to work on a SR&ED project. Each company may have a specialty or knowledge that would be useful in pursuing the advancement. This is typically done through a Contract or Joint Venture.
Contract
If a company (Company A) is pursuing advancement and hires the expertise of another company (Company B) through a contract to help pursue the SR&ED, Company A would file a SR&ED claim provided that Company A has the sole right to exploit the results of the SR&ED as per their contract with Company B. Contract payments are claimed at 80% of the eligible expense for purposes of SR&ED. As a result of the SR&ED contract, Company B may also be eligible to file a SR&ED claim if their contract work meets the definition of SR&ED and their costs exceeded the contract revenue. Or if their work was to cover a different technological uncertainty and they would own the intellectual property of that research. Company B would deduct the contract revenue they received from their expenses on their claim.
Joint Venture
If two or more companies collaborate staff and resources to pursue SR&ED and each has a right to exploit the results of the SR&ED, they would file a joint SR&ED claim. In filing a joint claim, each company would claim their share of the SR&ED expenses but the written portion of the claim would likely be the same. There are overall limits on claims and the participating companies may also have to file additional schedules to allocate those limits.
If you would like more information on this topic, please contact a member of the Empire CPA team by filling out the contact form below.
Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. Empire, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.
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