You may claim a notional allowable deduction for a 'sometimes exempt income loss'. A sometimes exempt income loss can arise for a CFC in an accounting period if:
- the CFC passed the active income test for the period, or
- the CFC gained the benefit of the de minimis exemption for the period
and the CFC has any expenses that are not notional allowable deductions but would have been if the CFC had not passed the active income test or gained the benefit of the de minimis exemption.
How is the sometimes exempt income loss worked out?
The sometimes exempt income loss is worked out by:
- assuming that the CFC had passed the active income test and did not have the benefit of the de minimis exemption
- working out the amounts that would be included in the notional assessable income - called the sometimes exempt income
- working out notional allowable deductions that would be available if the sometimes exempt income were assessable - called sometimes exempt deductions.
If sometimes exempt deductions of a class of income are more than the sometimes exempt income of that class, the difference is a sometimes exempt income loss.