Schedule 23, Agreement Among Associated Canadian-Controlled Private Corporations to Allocate the Business Limit

Schedule 23, Agreement Among Associated Canadian-Controlled Private Corporations to Allocate the Business Limit

All CCPCs that are associated have to file Schedule 23.

This schedule is used to:

• identify all the corporations to establish:

  • the date the balance of tax is due (see "Balance-due day" on page 14)

  • the calculation of the reduction to the business limit

• allocate a percentage of the business limit to each associated corporation. The total of all percentages cannot be more than 100%. The maximum business limit is provided at Line 410 - Business limit, on page 77

  Notes
  Only one of the associated or related corporations needs to file Schedule 23 for a calendar year. However, if Schedule 23 is not already on file when the CRA assesses any of the returns for a tax year ending in the calendar year of the agreement, it will ask for one.

  If the corporation's tax year is shorter than 51 weeks, prorate the business limit allocated in column 400 of Schedule 23 based on the number of days in the tax year divided by 365.

Associated corporations with more than one tax year in a calendar year

Special rules apply to determine the business limit for associated corporations that have more than one tax year ending in the same calendar year.

For the second or later tax years that end in the same calendar year, the business limit is whichever of the following amounts is less:

• the amount allocated to the corporation for the first tax year

• the amount allocated to the corporation for the later tax year in question

Make sure the total of the business limits of all associated corporations for any tax years that end in the same calendar year is not more than the maximum allowable business limit for that calendar year.

If the corporation's tax year is shorter than 51 weeks, prorate the business limit as determined above, based on the number of days in the tax year divided by 365.

Example

Corp A and Corp B are associated in 2024.

Corp A's tax year runs from January 1, 2024, to June 30, 2024.

The business limit allocated to Corp A for its June 30, 2024, tax year is $100,000.

On November 1, 2024, Corp C becomes associated with Corp A and Corp B. The tax year-end for Corp C is December 31, 2024. Corp A and Corp B change their year-ends to match Corp C's year-end.

The corporations decide to allocate a $300,000 business limit to Corp C for the December 31, 2024, year-end. Because the total of their business limits cannot be more than $500,000, the corporations allocate $90,000 to Corp A and $110,000 to Corp B.

Question

What is Corp A's business limit for each of the two tax years ending in the 2024 calendar year?

Answer

Tax year ending June 30, 2024:

Because the tax year is shorter than 51 weeks, Corp A prorates the business limit for the number of days in the tax year as follows:

$100,000

×

181 days 365 days

=

$49,589

Tax year ending December 31, 2024:

Because the tax year is shorter than 51 weeks, Corp A prorates the business limit for the number of days in the tax year. Corp A uses the $90,000 business limit allocated in this tax year, because it is less than the $100,000 business limit allocated in its first tax year ending in 2024.

Corp A prorates the business limit as follows:

$90,000

×

184 days 365 days

=

$45,370

Reference
Subsection 125(5)

5