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Unformatted text preview: e income derived from Canada is in connection with or incidental to the trade or business, and n the trade or business in the united states is substantial in relation to the activity carried on in Canada. n The active trade or business test looks not to the characteristics of the person that derives the income but to the circumstances in which the income arises. in doing so, the conditions noted above consider the nature of the person’s activity and the connection between the income and that activity. The active trade or business test does not encompass the business of making or managing investments, unless these activities are carried on with customers in the ordinary course of business by a bank, an insurance company, a registered securities dealer, or a deposit-taking financial institution. in other words, the activities that give rise to passive investment income must occur in the context of an active trade or business as a regulated financial institution. an entity may have passive investment income, provided that it carries on a qualifying trade or business. 98 n c anadian tax journal / revue fiscale canadienne ( 2009) vol. 5 7 , n o 1 unlike the qualifying person tests, the active trade or business test must be...
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