Rual Ltd. is a Canadian controlled private corporation (CCPC) with a December 31 year end. The...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Rual Ltd. is a Canadian controlled private corporation (CCPC) with a December 31 year end. The components of its Net Income For Tax Purposes are as follows: Active Business Income (Note 1) Net Taxable Capital Gains Rental Loss from Investment Property (Note 2) Foreign Source Interest (Note 2) Dividends (Note 3) $ 950,225 112,900 (27,550) 45,375 583,750 Note 1: The active business income amount includes manufacturing profits of $774,100. This amount qualifies for the M&P deduction. Since the company operates in a province that provides a special rate for M&P profits, the company calculates the federal M&P deduction. Note 2: Both of the investments that generate rental income or losses and foreign source interest have been made with funds that are no longer needed in the active business operations. In addition, there are no foreign taxes required to be paid on the foreign source income as a result of an income tax treaty. Note 3: Total dividends received in the 2020 year are made up of the following amounts: Eligible Portfolio Dividends from Canadian Companies Non-eligible Dividends from Dual Ltd. (Note 4) Non-eligible Dividends from Fual Ltd. (Note 5) Total Dividends $ 142,435 230,000 211,315 $ 583,750 Note 4: Dual Ltd. is a wholly owned subsidiary of Rual Ltd. since Rual owns all of its shares. In 2020, the payment of the dividend to Rual resulted in a non-eligible dividend refund of $79,200. Note 5: Rual owns 60 percent of the voting shares of Fual Ltd. In 2020, the payment of non-eligible dividend to Rual resulted in a dividend refund of $62,700. Fual had no GRIP balance at year end, and had insufficient non-eligible RDTOH. As a result, Fual was forced to use up all of its eligible RDTOH to maximize its dividend refund. Assume that 20 percent of its dividend refund it attributable to its eligible RDTOH and 80 percent to its non-eligible RDTOH. Additional Information: 1. On December 16, 2020, Rual paid taxable dividends to its shareholders totaling $315,000. No other dividends were paid during the year. It is policy of the company to designate dividends as eligible only to the extent that their payment will result in a dividend refund. 2. Rual has a 2016 net capital loss carry forward balance of $76,100. In addition, there is a 2018 non-capital loss carry forward balance of $40,600. Rual would like to deduct the maximum amount of these carry forward losses possible for their 2020 taxation year. 3. Rual has controlled both Dual and Fual since 2016, and as a result the three corporations are all associated in the 2020 year and in the immediately preceding year. The companies have agreed that Rual will be allocated $325,000 of the small business limit for 2020; dual $100,000; and Fual $75,000. All three corporations use a December 31 year end. 4. The combined Adjusted Aggregate Investment Income (AAII) for the three associated corporations for the 2019 year is $48,700 and will be $58,450 for 2020. The Taxable Capital Employed in Canada (TCEC) of the three associated corporations total $9,125,000 for the 2019 year and will equal $11,660,000 for 2020. 5. At December 31, 2019, Rual had an eligible RDTOH balance of $26,875, a non-eligible RDTOH of $103,850, and a GRIP balance of $167,000. During 2019, Rual paid taxable dividends of $96,500, $16,500 of which were designated as eligible. As a result of paying the dividends, Rual received a dividend refund of $36,991. 6. Assume for the purposes of the federal abatement that 97 percent of Rual's Taxable Income has been allocated to the provinces. Required: Show all of the calculations used to provide the following required information, including those for which the result is nil. For Rual Inc.'s 2020 taxation year, calculate the following items: A. Part I tax payable B. The Refundable portion of Part I tax C. Part IV tax payable D. The balance in the GRIP account on December 31, 2020 E. The balance in both the Eligible RDTOH and Non-eligible RDTOH on December 31, 2020. F. The dividend refund, if any, showing separately the amount attributable to eligible dividends and the amount attributable to non-eligible dividends. G. The total federal Tax payable Rual Ltd. is a Canadian controlled private corporation (CCPC) with a December 31 year end. The components of its Net Income For Tax Purposes are as follows: Active Business Income (Note 1) Net Taxable Capital Gains Rental Loss from Investment Property (Note 2) Foreign Source Interest (Note 2) Dividends (Note 3) $ 950,225 112,900 (27,550) 45,375 583,750 Note 1: The active business income amount includes manufacturing profits of $774,100. This amount qualifies for the M&P deduction. Since the company operates in a province that provides a special rate for M&P profits, the company calculates the federal M&P deduction. Note 2: Both of the investments that generate rental income or losses and foreign source interest have been made with funds that are no longer needed in the active business operations. In addition, there are no foreign taxes required to be paid on the foreign source income as a result of an income tax treaty. Note 3: Total dividends received in the 2020 year are made up of the following amounts: Eligible Portfolio Dividends from Canadian Companies Non-eligible Dividends from Dual Ltd. (Note 4) Non-eligible Dividends from Fual Ltd. (Note 5) Total Dividends $ 142,435 230,000 211,315 $ 583,750 Note 4: Dual Ltd. is a wholly owned subsidiary of Rual Ltd. since Rual owns all of its shares. In 2020, the payment of the dividend to Rual resulted in a non-eligible dividend refund of $79,200. Note 5: Rual owns 60 percent of the voting shares of Fual Ltd. In 2020, the payment of non-eligible dividend to Rual resulted in a dividend refund of $62,700. Fual had no GRIP balance at year end, and had insufficient non-eligible RDTOH. As a result, Fual was forced to use up all of its eligible RDTOH to maximize its dividend refund. Assume that 20 percent of its dividend refund it attributable to its eligible RDTOH and 80 percent to its non-eligible RDTOH. Additional Information: 1. On December 16, 2020, Rual paid taxable dividends to its shareholders totaling $315,000. No other dividends were paid during the year. It is policy of the company to designate dividends as eligible only to the extent that their payment will result in a dividend refund. 2. Rual has a 2016 net capital loss carry forward balance of $76,100. In addition, there is a 2018 non-capital loss carry forward balance of $40,600. Rual would like to deduct the maximum amount of these carry forward losses possible for their 2020 taxation year. 3. Rual has controlled both Dual and Fual since 2016, and as a result the three corporations are all associated in the 2020 year and in the immediately preceding year. The companies have agreed that Rual will be allocated $325,000 of the small business limit for 2020; dual $100,000; and Fual $75,000. All three corporations use a December 31 year end. 4. The combined Adjusted Aggregate Investment Income (AAII) for the three associated corporations for the 2019 year is $48,700 and will be $58,450 for 2020. The Taxable Capital Employed in Canada (TCEC) of the three associated corporations total $9,125,000 for the 2019 year and will equal $11,660,000 for 2020. 5. At December 31, 2019, Rual had an eligible RDTOH balance of $26,875, a non-eligible RDTOH of $103,850, and a GRIP balance of $167,000. During 2019, Rual paid taxable dividends of $96,500, $16,500 of which were designated as eligible. As a result of paying the dividends, Rual received a dividend refund of $36,991. 6. Assume for the purposes of the federal abatement that 97 percent of Rual's Taxable Income has been allocated to the provinces. Required: Show all of the calculations used to provide the following required information, including those for which the result is nil. For Rual Inc.'s 2020 taxation year, calculate the following items: A. Part I tax payable B. The Refundable portion of Part I tax C. Part IV tax payable D. The balance in the GRIP account on December 31, 2020 E. The balance in both the Eligible RDTOH and Non-eligible RDTOH on December 31, 2020. F. The dividend refund, if any, showing separately the amount attributable to eligible dividends and the amount attributable to non-eligible dividends. G. The total federal Tax payable
Expert Answer:
Answer rating: 100% (QA)
To calculate the required items for Rual Incs 2020 taxation year well need to perform several calculations Lets go through each item step by step A Part I tax payable 1 Calculate the small business de... View the full answer
Related Book For
Canadian Income Taxation Planning And Decision Making
ISBN: 9781259094330
17th Edition 2014-2015 Version
Authors: Joan Kitunen, William Buckwold
Posted Date:
Students also viewed these law questions
-
A bakery with a December 31 st year end purchased new equipment on October 31 st 2000 for $10,000. This was their first equipment purchase. Required: What are the tax consequences if the equipment is...
-
Falko Ltd. is canadian controlled privated corporation with a december31 year end. For its year ending december 31, 2020, its acounting net income before taxes before taxes, as determined using...
-
Tern Corporation, a calendar year C corporation, is solely owned by Jessica Ramirez. Terns only business since its incorporation in 2011 has been land surveying services. In Terns state of...
-
The Medical College Admissions Test (MCAT) is commonly used as part of the decision-making process for determining which students to accept into medical schools. To test the effectiveness of the...
-
What is the difference in energy levels of the sodium atom if emitted light has a wavelength of 589 nm?
-
Briefly describe each of the following kinds of social media: a. social networking service b. blog c. microblogging service d. social bookmarking service e. RSS aggregator f. sharing websites g....
-
Accounts and Notes Payable the following are selected 2010 transactions of Darby Corporation. Sept. 1 Purchased inventory from Orion Company on account for $50,000. Darby records purchases gross and...
-
5. A construction worker uses a rope and pulley system to raise a 27-kg can of paint 3.1 m to the top of a scaffold (Figure 5). The downward force on the rope is 3.1 x 102 N as the rope is pulled 3.1...
-
Ivanhoe Company ended its fiscal year on July 31, 2020. The company's adjusted trial balance as of the end of its fiscal year is as follows. Ivanhoe Company Adjusted Trial Balance July 31, 2020 No....
-
Determine cost of sales and ending inventory using FIFO, LIFO, and average cost. Modelmania Ltd sells model cars. At the beginning of March, Modelmania Ltd had in beginning inventory 90 model cars...
-
An article in the Wall Street Journal on proposals to change the regulations governing the trading of financial derivatives contained the following: The SEC and the Commodity Futures Trading...
-
According to an article in the Wall Street Journal: The identity of who buys gold has changed radically. . . . Just five years ago, jewelry accounted for two-thirds of gold demand. Last year, it...
-
An article in the Wall Street Journal noted: The cost of credit default swaps on Italian and Spanish government and corporate debt surged last week. What does an increase in the price of credit...
-
If the value of the Canadian dollar falls with respect to the euro, what will be the likely impact on European exports to Canada? Will the effect be the same on Canadian exports to Europe?
-
An article observes that the high value of the yen is dealing crippling blows to the countrys once all-important export machine. The article also observes, though, that a high yen benefits Japans...
-
If the distribution of Tabuk Companys shares during the years 2016-2020 is as shown in the following table, what is required to calculate the value of the company's share if the required return is...
-
1. Advertising for eyeglasses _________ (increases/decreases) the price of eyeglasses because advertising promotes _________. 2. An advertisement that succeeds in getting consumers to try the product...
-
Using the information provided in Question Eight, determine TV Ltd.s refundable tax on investment income. Income tax reference: ITA 123.3, 129(4).
-
Robert Blackwell owns 100% of the outstanding shares of Black Inc., a qualified small business corporation. The shares have a paid-up capital (PUC) and an adjusted cost base of $50,000 and a fair...
-
Briefly explain how using a holding company to own the shares of an active business corporation may be beneficial when the shares of the active business corporation are about to be sold. In what...
-
A manager has been using a certain technique to forecast demand for project man- agement software at her store. Actual demand and her corresponding predictions are shown below: a. What was the...
-
Why aren't the effective capacity and the optimal operating level of any operation necessarily the same amount of activity?
-
A certain facility has a design capacity of 2,500 units a day and an effective capacity of 2,225 units. Name one potential determinant of its effective capacity.
Study smarter with the SolutionInn App