Why introduce the passive income business limit reduction

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Reference no: EM132726117

It has always been the case that most types of investment income, such as interest, dividends and capital gains, are not considered active business income and therefore do not qualify for the small business deduction. A somewhat recent change to the small business rules occurred in 2018 when the passive income business limit reduction (where adjusted aggregate investment income over a certain level grinds the annual business limit) was introduced into legislation. Prior to that, the amount of investment income earned by the corporation did not reduce the annual business limit for corporations.

Problem 1: Why this change in legislation was introduced? Since investment income has never qualified for the small business deduction, why introduce the passive income business limit reduction into legislation? What was the Federal Government's intention when creating these new rules

Reference no: EM132726117

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