Active business income is defined in Canadian Income Tax Act subsection 125(7) and includes most income earned by a corporation from business activities. It is important because it ties into the rules for claiming the small business deduction by Canadian corporations. The small business deduction or SBD is a tax rate reduction, rather than a tax deduction, and is available on the first $500,000 of active business income earned by the corporation. Active business income specifically excludes Specified Investment Business (SIB) income.
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