Neville Ltd. is a Canadian-controlled private corporation which was incorporated in 1996 with a December 31 year-end. In 2012, Neville Ltd. earned net income of $250,000 before taxes for accounting purposes. Included in the calculation of that amount were the following items:
Canadian active business income .................................................... $159,000
Dividends from taxable Canadian subsidiary corporations ........................... 8,000
Other Canadian investment income:
- Rental income ........................................................................ $ 4,000
- Interest income ........................................................................ 15,000
- Royalty income ........................................................................ 1,000
- Taxable capital gain ................................................................... 9,000
U.S. interest income ($2,000 withheld) ............................................... 15,000
U.S. business income ($20,000 tax paid) ............................................. 96,000
Income under Division B ............................................................ $307,000
Donations to registered charities .................................................... $ 60,000
The company also has the following balances at January 1, 2012:
1999 Net capital loss .................................................................. $ 15,000
Charitable donations carried forward from 2011 ................................... 10,000
The company retails its products in Canada and the United States. Its total proportion of taxable income earned in Canada, as per Regulation 402, is 75%. Assume that the provincial tax rates on taxable income are 12% and that Neville Ltd.'s foreign tax credits are equal to the U.S. tax withheld on the income.
Neville Ltd.'s 100% owned subsidiary has used $350,000 of the business limit for the small business deduction in 2012. Together, Neville Ltd. and its subsidiary have $8 million of taxable capital in Canada.
REQUIRED
Compute the federal Part I tax and provincial tax payable by Neville Ltd. for 2012. Show all calculations.