I have a corporate client who works in the film industry in Canada.
He was audited and reassessed as a Personal Service Business. All expenses were disallowed and when the adjustments were made the income for the year was entered on Schedule 7 on line 32 "Total income from property (include income from a specified investment business carried on in Canada other than income from a source outside Canada). The Small Business Limit was disallowed as well.
We fought this and the decision that the corporation was a PSB was reversed. Some expenses were still denied but the Net Income was changed and penalties were reversed.
When CRA Audit division made the 2nd set of adjustments for the final audit it still shows that same PSB income on Line 32 on Schedule 7 and the Small Business Limit has still been denied. I think that should have been taken out and the Small Business Limit reinstated.
Am I missing something or did they just not remove it when they should have?
