CRA indicates that a s. 110.1(1)(a) deduction by a CCPC is applied first as a deduction to lower-rate business income, rather than higher-rate investment income

CRA noted that the effect of excluding most taxable capital gains from the definition of “full rate taxable income” in s. 123.4(1) is that where a CCPC, that has realized business income and taxable capital gains (e.g., from a sale of that business) in a year, has also made a charitable gift, the donation produces a tax reduction based on the low tax rate applicable to the business income rather than the higher rate applicable to aggregate investment income such as taxable capital gains.

Neal Armstrong. Summary of 8 October 2021 APFF Financial Strategies and Instruments Roundtable, Q.4 under s. 123.4(1) - full rate taxable income – (b).