CRA states that expenses “likely” cannot be streamed to minimize SCI

Where some of the business income of a Canadian-controlled private corporation is ineligible for the small business deduction because of the “specified corporate income” (SCI) provisions, can it allocate expenses to the activities generating the latter type of income in order to maximize its SBD?

CRA responded that “only the expenses that are reasonable to consider to be attributable to the activities generating the [SCI] income … should be considered” as deductions from the SCI income. The CRA ruling summary stated more succinctly: “Likely not.”

Neal Armstrong. Summary of 7 February 2018 External T.I. 2017-0706401E5 under s. 125(1)(a)(i)(B).