After describing an intricate and redacted factual situation regarding the eligibility to the small business deduction (SBD) of numerous Canadian-controlled private corporations for three sets of taxation years, CRA concluded that, absent the s. 256(2) election, all of the corporations were associated with each other for the 2003, 2004 and 2005 taxation years and that, even if all the third corporations were to make the election for the 2003, 2004 and 2005 taxation years, and in light of s. 125(5.1), no amount in respect of a SBD could be claimed by any of the corporations for the 2005 taxation year, and that the SBD would only be available for one of the corporations for its 2003 taxation year and for two of the corporations for their 2004 taxation year. Before so concluding, CRA noted:
We understand that it has been the policy of the Compliance Programs Branch since October 21, 1993, to administratively accept a late-filed election from a third corporation where the following two conditions are satisfied:
(a) the T2 return of the electing corporation for the particular year is not statute-barred or, if statute-barred, the corporation did not claim any amount as a business limit for the year; and
(b) where the T2 return for the particular year of any other corporation to which the election applies is statute-barred, there will be no revision to the amount of the business limit allocated to that corporation for the taxation year.