Question
Chester and Ramona Arnold own the shares of Mainly Inc., split 60/40 respectively. Chester is Ramona's parent. Ramona also owns 55% of the shares of
Chester and Ramona Arnold own the shares of Mainly Inc., split 60/40 respectively. Chester is Ramona's parent. Ramona also owns 55% of the shares of Purely Inc., and the remaining shares are owned by Roshan Kabiri (25%) and Dion Karras (20%). Roshan and Dion are not related to one another, nor are they related to Chester and Ramona. All of the shares held in both corporations are common shares. In Year 1 Mainly Inc. earned $700,000 of active business income and Purely Inc. earned $500,000 of active business income. Mainly's taxable income was $750,000 and Purely's taxable income was $500,000. Mainly reported $100,000 of adjusted aggregate investment income in the previous year. Purely did not report any investment income. The two companies have decided that Purely will not use any of the small business deductions in 2020. The combined taxable capital of the two corporations is less than $10 million.
How much of the small business deduction is available to Mainly Inc. in Year 1?
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