If my corporation becomes associated with another partway through the year, how is the deduction split?

If your corporation becomes associated with another partway through a taxation year, the shared small business limit generally needs to be prorated or otherwise adjusted to reflect the period during the year that the corporations were actually associated, rather than simply applying full-year association rules to a relationship that only existed for part of the year. Getting this timing right adds a layer of complexity beyond the straightforward case of corporations that were associated for the entire year.

The specific mechanics depend on exactly when the association arose during the year and how each corporation's own taxation year lines up with the other's, since associated corporations don't always share the same fiscal year-end, which can make the proration calculation more involved than it first appears. This is an area where working through the actual dates and figures carefully matters, since getting it wrong can mean claiming more or less of the small business rate than you're actually entitled to for that transitional year.

Because mid-year association changes are exactly the kind of situation that trips people up, the calculation isn't as simple as splitting the limit evenly by months, this is worth working through with an accountant familiar with the associated corporation rules rather than estimating it yourself.