Section 123.4

Subsection 123.4(1)

Full Rate Taxable Income

Administrative Policy

2 February 2017 Quebec CPA Individual Taxation Roundtable Q. 1.1, 2016-0674221C6 F - General deduction from tax - 123.4

income on which the SBD was not claimed nonetheless is not eligible for the general rate deduction

A Québec Canadian-controlled private corporation that did not benefit from the applicable Québec small business deduction could benefit from not receiving the SBD at the federal level. Although the combined corporate tax rate would rise from 22.3% to 26.9%, a benefit from not accessing the federal SBD would result from the fact that all its active business income could be distributed as eligible dividends. Where a CCPC determines not to deduct the SBD to which it is entitled in computing its federal tax, will its general deduction from tax under s. 123.4(2) thereby increase? In responding negatively, CRA stated:

[A] CCPC may choose not to deduct an amount as a SBD, but the least of the amounts determined under paragraphs 125 (1) (a) to (c) would nevertheless reduce taxable income in the computation of its "full rate taxable income" used in the calculation of the GDT under subsection 123.4(2).