4. (2 marks)

Linda, a resident of Canada, owns 100 % of the common shares of both Windsor Retail Ltd. (WRL) and Yellowknife Klosets Ltd. (YKL). Both corporations have a August 31 year- end.

YKL had BOTH active business income AND taxable income of $ 24,000 for its 2019

taxation year. Barbara has decided to allocate to YKL as much of the small business

limit as is needed to maximize the small business deduction for YKL, with the

remaining balance of the available annual business limit allocation being made to

WRL.

Most but not all of WRL s income is from an active business carried on in Canada.

The following information pertains to WRL for its 2019 taxation year:

Division B net income for tax purposes $ 210,000 Net taxable capital gains 12,000 Charitable donation contributions 5,000

Recapture of CCA on sale of operating business assets 10,000

Required:

The small business deduction for WRL for 2019 should be:

1. $ 41,800
2. $ 40,850
3. $ 43,130
4. $ 37,620

None of the above