Can a corporation choose not to take the small business deduction to enable it to add an amount to its general rate income pool account ("GRIP "), so as to enable its shareholders to receive eligible dividends? After quoting the “may” be deducted language in the s. 125(1) preamble, CRA stated (TI translation):
Based on this text and especially that emphasized, we are of the view that a corporation has no obligation to deduct the small business deduction to which it is entitled. …
If no amount was deducted under subsection 125(1), no taxable income reduction [under D of the GRIP definition] would occur because of variable B [of the adjusted taxable income formula].