|Reasonable Expectation of Profit Rules|
Reasonable expection of profit is a concept used by CRA to determine if your business is operating for 'profit' or for 'pleasure'. CRA wants to determine if the business was undertaken in pursuit of profit and if so, is the business being carried out in accordance with objective standards of business behaviour (ITTN#41). if CRA determines that the business is not being operated in a business like manner, they can deny any losses that you may have claimed.
Begin by developing a business plan to clearly demonstrate that you have profit goals and a strategy to achieving them.
You want to be very careful that you can clearly demonstrate to CRA that you are in pursuit of profit. Business behaviour means that you keep a daytimer or calendar of your business appointments, opportunities and any other activities. it means that you are keeping a vehicle log to demonstrate the business use of that vehicle. it means that you are keepiing track of your expenses in a responsible and timely manner. It means that you are retaining your books and records in a business-like manner.
The best way to do any of the above is to do it on a daily basis and incorporate these good habits into your daily business activities.
if you wish to discuss the profit rules or would like more insight, please call right away.