Sally Corbet is the sole shareholder of Corbet Holdings Ltd. (CHL), a Canadian-controlled private corporation. The corporation holds investments in shares, bonds, and real estate. You have been retained to complete CHL's tax return for the year ended December 31, 20X2, and provide certain other tax advice.
It is now February 15, 20X3, and you have gathered the information outlined below.
1. The draft income statement for the year ended December 31, 20X2, is as follows:

2. CHL owns a 40% interest in Delroy (a partnership), which has a June 30, 20X2, year end. The partnership€™s profit for the year was $200,000, which consisted of dividends from taxable Canadian corporations of $80,000 and royalties from mineral rights of $120,000. On December 31, 20X2, CHL received $100,000 as its share of a partnership cash distribution. The partnership€™s results are not reflected in the above income statement.
3. On September 30, 20X2, CHL purchased a $100,000 guaranteed investment certificate bearing 9% interest. The company intends to record the interest of $9,000 on September 30, 20X3, its one-year anniversary date.
4. The dividend income of $34,000 consists of the following:

Canadian Public corporations ………………………..          $16,000

Turner Inc.—an American corporation—net of a 10% U.S.  

            withholding tax …………………..                               18,000

Not included in the above is a dividend received from Pantry Products Ltd. of $25,000. CHL owns 50% of its voting shares and records the investment using the equity method of accounting. Pantry earned business income of $240,000 in the current year.
5. During the year, CHL received 100 shares of Mustang Ltd. (a public corporation) as a stock dividend. Mustang increased its paid-up capital by $30 for each stock dividend share issued. CHL did not record the receipt of the stock dividend.
6. In January 20X2, CHL purchased three hectares of land at Pelican Lake for $130,000.The land was then rezoned and subdivided into six building lots. The entire subdivision was immediately sold to a building contractor for $300,000.The payment terms called for no cash down, but payments of $50,000 are required as the contractor completes construction on each lot. By December 31, 20X2, one payment of $50,000 had been received.
7. In 20X1, CHL had purchased two rental properties as follows:

Maximum capital cost allowance was claimed in 20X1.
In 20X2, townhouse 1 was sold for $75,000 (land $25,000, building $50,000).
On December 1, 20X2, CHL purchased townhouse 2 for $50,000 (land $11,000, building $39,000). Also, in 20X2, CHL constructed a sixplex rental unit for $437,000, as follows:

Land………………………………………                      $ 80,000

Permanent landscaping……………………              8,000

Labour and materials………………………           300,000

Air-conditioning and heating equipment…..  49,000

                           ……………………………………     $437,000

All of the properties resulted in a net rental loss of $19,000 (as shown on the financial statement).The following items are included in the net loss calculation:

Cost of surveying land (new sixplex)…       $ 2,400

Amortization/depreciation ……………            28,000

Legal fees for mortgage (new sixplex)…       2,000

Advertising for new tenants ……………           4,000

Required:
Determine CHL€™s net income for tax purposes for the 20X2 taxation year. Also, prepare a breakdown of the net income for tax purposes showing the net income from property and any other sources of income. Assume all rental properties are residential properties.

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Income Interest on bonds and certificates Dividend income Net loss from real estate rentals Gain on sale ofland (Pelican Lake) Share of profits of Pantry Products Ltd S 78,000 32.000 (19,000) 170,000 120.000 381,000 Expenses Legal fees for general corporate affairs Director's fees Donations-charitable 1,000 21.000 8,000 30,000 $351.000 Income before income tax Land Buildin Total S50,000 S150,000 $200,000 20,000 40,000 60,000 S70.000 S190.000 $260.000 Fourplex Townhouse 1