6 worked T2125 Business Income Statement case studies — the position a client typically comes to us with, what we do, and what it is worth. Each is an illustrative example built on the rules that apply to t2125 business income statement work, not a specific client's file.
Case Study 1 · Records and systems rebuilt
29 Months Reconciled And $20,500 Of Input Tax Recovered — Family-Staffed Proprietorship, Calgary
Client: A proprietor whose spouse works in the business · Where: Calgary, Alberta · Engagement: 8 weeks, fixed fee
Months reconciled29
Input tax recovered$20,500
Close time8 days
The situation — A proprietor whose spouse works in the business, Calgary, Alberta
A proprietor whose spouse works in the business in Calgary, Alberta was carrying three partners operating on a handshake, with no written agreement covering allocations or a departure. Nothing reconciled, and every filing started with 29 months of cleanup.
What we did for A proprietor whose spouse works in the business, Calgary, Alberta
We rebuilt from source rather than correcting on top of the existing file. We split the shared overhead on a documented basis, so each partner’s reported share carried only the expenses that belonged to it, then set the routine that keeps it clean.
The result — A proprietor whose spouse works in the business, Calgary, Alberta
29 months reconciled to the bank. The close now takes 8 days, and $20,500 of previously unclaimable input tax was recovered in the process.
Case Study 2 · CRA review defended
$14,000 Reassessment Reduced To Nil On Review — Farming Partnership, Lethbridge
Client: A farming partnership · Where: Lethbridge, Alberta · Engagement: 3 weeks, fixed fee
Reassessment reduced toNil
Tax protected$14,000
Prior filingsUndisturbed
The situation — A farming partnership, Lethbridge, Alberta
A review notice arrived at a farming partnership in Lethbridge, Alberta covering t2125 business income statement for two tax years. The auditor's working position was an adjustment of $14,000, driven by an incorporation completed without the section 85 election, triggering an unnecessary gain.
What we did for A farming partnership, Lethbridge, Alberta
Rather than negotiate, we rebuilt the record. We drafted the allocation, admission and withdrawal terms into a written agreement before the next partner was admitted and submitted a point-by-point response that answered each proposed adjustment with the document behind it.
The result — A farming partnership, Lethbridge, Alberta
The auditor accepted the documented position and closed the review without adjustment, protecting $14,000 and leaving the prior filings undisturbed.
Case Study 3 · Structure rebuilt
Corporate Structure Rebuilt For $25,500 Of Annual Savings — Food-Truck Proprietorship, Kelowna
Client: A food-truck sole proprietorship · Where: Kelowna, British Columbia · Engagement: 5 weeks, fixed fee
Saving per year$25,500
DocumentationComplete
Transfer basisRollover
The situation — A food-truck sole proprietorship, Kelowna, British Columbia
The structure at a food-truck sole proprietorship in Kelowna, British Columbia had been set up years earlier for a business that no longer existed, and partner draws that had pushed one partner’s adjusted cost base negative had become expensive.
What we did for A food-truck sole proprietorship, Kelowna, British Columbia
We kept the proprietorship on a December 31 fiscal period and moved the year-end question into the incorporation plan where it could actually be answered. The reorganisation used the rollover provisions rather than a taxable transfer, so no tax fell due on the restructuring itself.
The result — A food-truck sole proprietorship, Kelowna, British Columbia
$25,500 of annual saving, achieved on a tax-deferred basis. The minute book, elections and valuations are all in the file.
Case Study 4 · Cash and remittance control
Instalments Rebased, $106,000 Of Cash Returned To The Business — Two-Partner Architecture Practice, Moncton
Client: A two-partner architecture practice · Where: Moncton, New Brunswick · Engagement: 7 weeks, fixed fee
Cash returned$106,000
Instalment basisCurrent year
ReviewedQuarterly
The situation — A two-partner architecture practice, Moncton, New Brunswick
A two-partner architecture practice in Moncton, New Brunswick was paying instalments calculated on a prior year that no longer reflected the business. A proprietor planning around a September year-end that the rules did not permit was tying up $106,000 of cash.
What we did for A two-partner architecture practice, Moncton, New Brunswick
We rebased the instalments on the current-year estimate rather than the prior-year default, and reconciled each partner’s allocation, capital account and drawings, so what was reported for tax matched the agreement instead of the cash taken.
The result — A two-partner architecture practice, Moncton, New Brunswick
$106,000 of cash stayed in the business, the penalty cycle ended, and the instalment position is reviewed each quarter against actual results.
Case Study 5 · Missed incentive claimed
$70,000 Credit Claim Filed And Accepted Without Adjustment — Unincorporated Trades Business, Victoria
Client: An unincorporated trades business · Where: Victoria, British Columbia · Engagement: 9 weeks, fixed fee
Claim value$70,000
AcceptedWithout adjustment
RepeatableAnnually
The situation — An unincorporated trades business, Victoria, British Columbia
An unincorporated trades business in Victoria, British Columbia assumed the credits did not apply to a business its size. An incorporation completed without the section 85 election, triggering an unnecessary gain meant they had applied all along.
What we did for An unincorporated trades business, Victoria, British Columbia
We identified the qualifying activity, built the documentation to support it, and filed the section 85 election with correct elected amounts and rolled the assets in without a taxable disposition.
The result — An unincorporated trades business, Victoria, British Columbia
$70,000 recovered. Because the eligibility analysis is on file, the same claim can be repeated each year with a fraction of the effort.
Case Study 6 · Objection and relief
$139,000 Of Penalties And Interest Cancelled On Relief — Incorporating Proprietor, Kitchener
Client: A proprietor preparing to incorporate · Where: Kitchener, Ontario · Engagement: 8 weeks, fixed fee
Penalties and interest cancelled$139,000
Relief groundsAccepted
AssessmentAdjusted to filed position
The situation — A proprietor preparing to incorporate, Kitchener, Ontario
An assessment of $139,000 landed at a proprietor preparing to incorporate in Kitchener, Ontario following a desk review. The auditor had not seen the records behind a partnership that crossed the T5013 threshold two years before anyone noticed.
What we did for A proprietor preparing to incorporate, Kitchener, Ontario
We rewrote the partnership allocation to match how the practice actually operated, effective for the following fiscal year, then set out the legislative basis for the position alongside the documents supporting it.
The result — A proprietor preparing to incorporate, Kitchener, Ontario
$139,000 of penalties and interest was cancelled under the taxpayer relief provisions, and the underlying assessment was adjusted to match the filed position.
Reviewed for the 2025 tax year by Udit Gupta, Founder and Tax Accountant. These case studies are illustrative worked examples composed from the CRA rules that apply to this type of work, not specific client files; figures are representative and outcomes depend on your own facts.
