Question
Coopers Incorporated is a Canadian-controlled private corporation located in London, Ontario. For its fiscal year ended December 31, 2019, the corporation had calculated its income
Coopers Incorporated is a Canadian-controlled private corporation located in London, Ontario. For its fiscal year ended December 31, 2019, the corporation had calculated its income for tax purposes under Division B as follows:
Canadian source:
Wholesale income .................................................................................... $205,000
Sale of Land Inventory** ......................................................................... 80,000
Rental income from warehouse fully rented on a five-year lease ..................... 15,000
Patent income from 60% owned subsidiary***............................................. 79,000
Interest on outstanding accounts receivable in retailing business ..................... 25,000
Recapture of CCA from sale of fixtures used in retailing business ....... 55,000
Interest income from 60% owned subsidiary***.................................................. 17,000
Foreign business Income.. 50,000
Foreign non business income..... 19,000
Taxable capital gain (from non-active assets)........................................................ 42,000
Dividend from connected Corporation (eligible)****..... 8,000
Dividends from non-connected taxable Canadian corporation.(non-eligible) 31,000
Division B net income for tax purposes ................................................. $626,000
**Land was sold on a regular basis by the company and recorded above as Taxable capital gains
*** 60% subsidiary is the only associated company to Coopers. It earned only active business income
**** The connected corporation received a refund of $2,000 as result of paying out the dividend
Additional information:
Coopers Inc. made the following selected payments during the year:
Charitable donations ................................................................... 7,000
Taxable non-eligible dividends .................................................... 130,000
Withholding tax on non-business income was .. 4,500
The balances in the tax accounts on December 31, 2020 were:
Charitable donations from 2019 ...................................................................$ 4,000
Non-capital losses from 2015 ....................................................................... 37,000
Net capital losses from 2018 ...................................................................... 45,000
Refundable dividend tax on hand (non eligible)......................................... 18,000
Refundable dividend tax on hand (eligible) 6,000
Dividend refund (non-eligible) for 2020 ..................................... 7,000
Coopers Inc. allocated $30,000 of its business limit to its other associated corporations.
Taxable income earned in Ontario, which is the Canadian jurisdiction in which Coopers Inc. operates, is approximately 90% of the total gross revenues and Salaries and wages. The remaining 10% is from the United States. Assume the business foreign tax credit is $5,000 and the General rate reduction is $47,450 (it is a given for the question-do not calculate these figures).
Coopers Incorporated has asked you to:
(A) review the above information and to make any corrections necessary with the exceptions of the assumptions in the question provided above. Compute the federal Part I tax and provincial tax at a 11% rate on federal taxable income for the 2021 taxation year, and
(B) Compute the dividend refund for 2021 and the amount of any RDTOH to be carried forward.
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