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Forum # $3$

Forum $3$: Active Business Income & the Small Business Deduction

OBJECTIVES

Define different types of corporations for tax purposes

Describe the conditions required for a Canadian$-$controlled private corporation to be eligible for the small business deduction

DISCUSSI$$N OVERVIEW

This discussion forum will help you distinguish active business income and understand the small business deduction.

DELIVERABLES

Your participation in the discussion forum, including the following:

A response to the initial question$($s$)$

Responses to at least two other students' posts

Step $1$: Read the following sections of the Income Tax Act:

Subsection $125(1)$

Subsection $125(7)$

Subsection $125\mathrm{.}1(1)$

Subsection $129(4)$

Subsection $129(6)$

Step $2$: Use the Income Tax Act to find the following definitions:

Definition of a Canadian Controlled Private Corporation

Definition of Active Business Income

Step $3$: Forum Questions: Post your response to the discussion board $-60\%$

Answer the following questions and post your response to the discussion board:

The small business deduction is only available to Canadian Controlled Private Corporations $($CCPCs$).$ With reference to the definition of a CCPC$,$ what are the key differences that distinguish a CCPC from a "public corporation"?

Identify sources of income that are generally excluded from Active Business Income. How does Active Business Income affect the calculation of the Small Business Deduction pursuant to ITA $125(1)?$