The determination of what otherwise would be a corporation’s “specified corporate income” for small business deduction purposes is deemed by para. (b) of the s. 125(7) deduction to be such lesser “amount that the Minister determines to be reasonable in the circumstances.” CRA stated:
The Department of Finance Explanatory Notes indicate that the Minister could determine a lower amount than the para. (a) amount to be the reasonable amount if, for example, the higher para. (a) amount includes income that it is reasonable to consider to be attributable to, or be derived from, income that would not be eligible for the small business deduction.
What is reasonable or not in the circumstances remains a question of fact that can only be made once all the relevant facts of a particular situation are known and have been fully considered. The CRA will only be able to provide specific examples once it has had the opportunity to fully consider specific fact situations involving a taxpayer’s computation of income otherwise determined under subpara. (a)(i) of the definition of “specified corporate income.”