The CRA recently provided a technical interpretation where it discussed
the application of the "specified corporate income" rules
as proposed in the 2016 federal budget.
The taxpayer in this case had a fairly common corporate setup,
see below:
A holding company owned the operating company, OpCo (100%), and
the Landco (51%). LandCo would charged Opco for the use of its land
and building. Opco operated as an active business from that
premises. The question posed to the CRA was whether LandCo could
claim the small business deduction on all its income from Opco
despite only holding 51% of the shares.
The answer was fairly straight forward – namely, that yes
it could claim the small business limit but that since all
corporations are control by the same person, HoldCo, they are
associated corporations and must share the small business limit of
$500,000.
