CRA indicates that a business limit is ground first based on taxable capital before it can be assigned

Under s. 125(5.1), the business limit is reduced on a straight-line basis if the total of the taxable capital of the Canadian-controlled private corporation in question and of associated corporations exceeds $10 million. CRA confirmed that any assignment of a CCPC’s business limit under s. 125(3.2) to another corporation can only occur after its business limit has first been ground under s. 125(5.1). There was no explanation as to why this question might have practical significance.

Neal Armstrong. Summary of 25 January 2018 External T.I. 2017-0709241E5 under s. 125(5.1).