ax Software Assignment Problem - Chapter 14 Tax Software AP 14-1 RadionFaux Industries Ltd. (RIL) is a Canadian controlled private corporation (CCPC) situated at 123 ABC Street in Ottawa, Ontario, K4E 1A1. Its Ontario corporation tax account number is 1234567. Its phone number is (613) 111-1111. It was incorporated on February 24, 1991, in Ontario. (The governments Crown copyright does not permit us to use fabricated business numbers in software problems. To reduce the number of ProFile error messages because of this, enter NR (for not registered) in the Business Number field on theInfo form.) The company has 1,000 shares of common stock issued and outstanding, all of which are owned by the only company shareholder Ms. Margaret Ottawa (SIN 527-000-301). Ms. Ottawa, the president and director of the company, is the person who should be contacted with respect to matters concerning the companys books and records. She is the authorized person as well as the signing officer. RIL is a retailer of pet supplies. All of its sales occur within Canada. It has net assets of $235,000 on December 31, 2022. This includes a few investments that Ms. Ottawa inherited from her father two years earlier. RIL owns all of the 500 common shares of OttawaFaux Inc., which owns most of the investments Ms. Ottawa inherited from her father. The common shares have a book value of $1,200,000. OttawaFaux Inc. has the same location and phone number as RIL OttawaFaux Inc. also has a calendar based taxation year (January 1 to December 31). Enter NR (for not registered) in the appropriate Business Number field for OttawaFaux Inc. OttawaFaux Inc. is also involved in earning active business income through the breeding and sale of championship dogs. It has total assets of $2,000,000 and total revenues for 2022 of $200,000. Its taxable capital employed in Canada was $350,000 as at December 31, 2021, and $365,000 as at December 31, 2022.

The following information applied to RIL:

Taxable capital employed in Canada2021 $328,000 Taxable capital employed in Canada2022 411,000 Total assets as at December 31, 2022 750,000 Non-eligible RDTOH as at December 31, 2021 5,200 Eligible RDTOH as at December 31, 2021 Nil Dividends declared and paid during 2021 Nil GRIP balance as at December 31, 2021 11,750 Capital dividend account as at December 31, 2021 6,000

RIL does not use International Financial Reporting Standards (IFRS). For the taxation year end-ing December 31, 2022, RILs income statement, before any deduction for income tax, was as follows: Sales revenues $580,000 Interest on long-term debt 27,500 Interest received on foreign bank account (Note 1) 20,000 Eligible dividends on Royal Bank shares 17,500 Non-eligible dividends from OttawaFaux Inc. (Note 2) 42,000 Gain on sale of shares (Note 3) 27,000 Total revenues $714,000 Cost of goods sold $208,000 Amortization expense 122,000 Other operating expenses 147,000 Total expenses (excluding income tax) $479,000 Net income (before income tax) $237,000

Note 1 Foreign withholding tax of 10% or $2,000 was paid in 2022.

Note 2 As a result of paying this $42,000 in dividends to RIL, OttawaFaux Inc. received a dividend refund of $14,000 from its non-eligible RDTOH. Note 3 On March 23, 2022, RIL sold 2,700 shares of Canadian Imperial Bank of Commerce. The common shares had cost $118,800 on June 6, 2019, and were sold for $145,800.

Other Information: 1. Expenses include a deduction for charitable donations to the Ottawa Civic Hospital in the amount of $5,000. 2. RILs expenses include penalties of $3,500 under the Income Tax Act resulting from a judgment in the Tax Court of Canada. 3. RIL reimbursed Ms. Ottawa $34,000 for business meals and entertainment for clients and suppliers during the year. 4. During the year, RIL incurred $20,000 in landscaping costs. For accounting purposes these are being treated as a capital expenditure, to be amortized using the straight-line method over 10 years. The related amortization is included in the amortization expense of $122,000 shown on the income statement. 5. The opening UCC balances as of January 1, 2022 were $246,000 for class 1, $135,000 for class 8, and $90,000 for class 10. The only disposition during the year was the sale of one of its delivery trucks. The truck had cost $35,000 and was sold for its carrying value of $12,000. The only acquis witiaosn an arms-length purchase of $52,000 in office furniture on April 1, 2022. 6. In 2022, RIL paid taxable dividends of $92,000. Of these dividends, $25,000 were desig-nated as eligible. On September 1, 2022, RIL also elects to pay the maximum capital divi-dend allowable. 7. RIL allocates $60,000 of the annual business limit to OttawaFaux Inc. This is $5,000 more than OttawaFaux Inc. can use in 2022, but RIL cannot use the excess. 8. RIL paid quarterly income tax instalments of $8,000 each on the 20th of March, June, Septem-ber, and December in 2022. 9. RIL has a website describing the products it carries, but no income is generated from the website. 10. Assume that the adjusted aggregate investment income (AAII) of both companies is nil at the end of the 2021 taxation year. 11. Assume that RIL and OttawaFaux Inc will split the immediate expense limit 50-50 for 2022.

Required: Prepare the federal corporate income tax return for RIL for the 2022 taxation year using the ProFile T2 corporate software program. Determine the eligible and non-eligible RDTOH and comment on whether the designation of $25,000 of eligible dividends was a good idea. If not, indicate the designation that you would have made. On the ProFile schedule titled Info, the Filing question Complete return from GIFI? is answered Yes by default; click No. Ignore the GIFI requirements except as follows: On GIFI Schedule 125: Input the total revenues less the gain on sale of shares ($580,000) on the line Total Sales of Goods and Services (Code 8000). Code 8091 is selected for the foreign interest of $20,000, Code 8094 is selected for the Canadian source interest of $27,500, and Code 8096 is selected for the Canadian source dividends of $59,500. Choose Realized gains/losses on sale of investments (Code 8211) from the drop-down menu under Code 8089 and input the gain on sale of shares of $27,000. Choose Purchases/cost of materials (Code 8320) from the drop-down menu under Cost of Sales and input the cost of goods sold of $208,000. Choose Amortization of tangible assets (Code 8670) from the drop-down menu under Operating Expenses and input the amortization expense of $122,000. Choose Other expenses (Code 9270) from the drop-down menu under Operating Expenses and Other Operating Expenses of $147,000.

On GIFI Schedule 100: Input $472,000 as Cash and deposits (Code 1000) in order to make the total assets equal to the total liabilities and equity. Although this will not properly complete the GIFI statements, it will eliminate the warning messages that would otherwise be generated when the net income amount and amortization expense are input on Schedule 1. These GIFI entries will have no effect on the calculations in the income tax return. In addition, to prevent audit warnings, S141, Notes Checklist, has to be completed. Assume there are no notes to the financial statements and answer No to any other relevant questions. Click review engagement in Part 2.