The CRA defines a business as “an activity that you conduct for profit or a reasonable expectation of profit”.
The profit test is used by the CRA to determine whether or not a person is actually running a business. The test asks, “Was the activity conducted with an actual expectation of profit?” and “Was that expectation of profit reasonable?” Only a person (or legal entity) operating a business can claim business expenses or business tax credits on their income tax or GST return. If the business does not pass the profit test, then all credits and expenses will be disallowed.
Criteria that the CRA uses to determine whether or not you are running a business:
For more information see the CRA's P-176R – Application of Profit Test to Carrying on a Business
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