Principal Issues: (1) For the purposes of variable B of subsection 127(10.2) (as it read for taxation years that end on or before February 25, 2008), whether it is possible to establish a business limit under section 125 in the case of a corporation that has made an election under subsection 89(11) not to be a Canadian-controlled private corporation ("CCPC") for the purposes described in paragraph (d) of the definition of "CCPC" in subsection 125(7). (2) Whether a corporation that has made an election under subsection 89(11) not to be a CCPC for the purposes described in paragraph (d) of the definition of "CCPC" in subsection 125(7) can still pay its income tax by quarterly instalments. Whether the "balance-due day" of such corporation is three months after the day on which the taxation year ends. (3) Where a corporation has made an election under subsection 89(11) not to be a CCPC for the purposes described in paragraph (d) of the definition of "CCPC" in subsection 125(7) (including subsection 125(1)), what are the amounts determined under paragraphs 125(1)(a) to (c) in respect of the corporation for the relevant year.
Position: (1) Yes. A corporation's business limit is determined under subsections 125(2) to (5.1) while paragraph (d) of the definition of "CCPC" in subsection 125(7) refers, among other things, to the application of subsection 125(1). (2) If no amount is deducted under section 125 in computing the corporation's tax payable for the taxation year and the preceding taxation year, the corporation would not qualify as a "small-CCPC" as defined in subsection 157(1.2). Consequently, such corporation would not be able to pay its income tax by quarterly instalments. However, despite the fact that a given corporation would have elected under subsection 89(11) not to be a CCPC in a particular taxation year, such corporation may have deducted an amount under section 125 in computing the corporation's tax payable for the preceding taxation year. If this is the case and if all the other conditions set out in paragraphs 157(1.2)(a), (b) and (d) are met, the said corporation would qualify as a "small-CCPC" and thus would be able to pay its income tax by quarterly instalments in the particular taxation year. However, in such a case, the corporation would have to make monthly instalments in the taxation year subsequent to the particular taxation year. Similar reasoning with respect to the "balance-due day" of such corporation. (3) Nil.
Reasons: Wording of the Act and previous positions.
