Opco carries on an active business using real estate rented to it (at an annual rental of $150,000) by Rentco (owned by the same shareholder), and does not earn “specified partnership income” or “specified corporate income.” Will Opco’s maximum business limit be $350,000? CRA responded:
[U]nder new subsection 125(10), the $150,000 of income that Rentco receives from Opco would be excluded from the definition of specified corporate income (i.e., it will continue to be treated as active business income of Rentco pursuant to subsection 129(6)), provided the following conditions are met:
(a) The $150,000 is income from an active business of Rentco from the provision of services or property to another associated corporation (i.e., Opco); and
(b) The $150,000 was not deductible by Opco in respect of an amount included in Opco’s income that is:
(i) referred to in any of clauses 125(1)(a)(i)(A) to (C); or
(ii) reasonable to consider as being attributable to or derived from an amount referred to in clause 125(1)(a)(i)(C).