Hello, I needed the solution to these question
from a Canadian Taxation Course.
INDIVIDUALS: TAX BRACKETS Taxable income Up to $48,535 In excess of $48,535 In excess of $97,069 In excess of $150,473 > $214,368 Tax 15% $7,280 plus 20.5% on the next $48,534 $17,230 plus 26% on the next $53.404 $31,115 plus 29% on the next $63,895 $49,645 plus 33% on the remainder TAX CREDITS BASIC CREDIT = $13,229 x 15% = $1,984 SPOUSE/SPOUSAL EQUIVALENT (ELIGIBLE DEPENDENT) -15% x ($13,229 minus spouse/eligible dependent's net income) =$1,984 MAX Base amount increased by $2,273 (to $15.502) if the spouse/eligible dependent is mentally or physically infirm. CANADA CAREGIVER FOR CHILD $17,085) = $1,091 MAX AGE CREDIT = 15% (S7,637 - 15% x (net income - $38,508)) = $1,146 MAX PENSION CREDIT=15% x Ist $2,000 of "pension income"= 5300 maximum (not indexed) ADOPTION CREDIT = 15% of Ist $16,563 of eligible adoption expenses = $2,484 MAX CHARITABLE DONATIONS = [(15%MA)] + [(33%)(B)] + [(29%)(C)) (not indexed), where A = the first $200 B = the lesser of 1) total gifts less $200 and 2) taxable income less $214,368 C=the excess, if any, by which the total donations exceed the sum of $200 plus amount B (eligible donations generally limited to 75% of net income) MEDICAL EXPENSE CREDIT = 15% ((B-C) + D) where B = eligible medical expenses of the taxpayer, spouse or minor dependants C= the lesser of 3% of the taxpayer's net income and $2,397 D-E-F E = eligible medical expenses of the adult dependant F=the lesser of 3% of the adult dependant's net income and $2,397 DISABILITY CREDIT = 15% x $8,576 = $1,286 X POLITICAL DONATION TAX CREDIT (not indexed) = 75% first $400, 50% next $350 and 1/3 next $525... (5650 max credit overall) EDUCATION-RELATED CREDITS (not indexed) (a) TUITION CREDIT = 15% x eligible tuition fees (b) STUDENT LOAN INTEREST = 15% of interest paid on qualifying student loans; 5 year carry forward by student TRANSFER OF UNUSED CREDITS TO SPOUSE AND OTHERS Tuition (to parents and grandparents if no spouse) Age (to spouse only) Pension (to spouse only) Disability to child, grandchild,parent , grandparent, brother, sister, aunt, uncle, nephew, niece of the taxpayer or the taxpayer's spouse) Dependent must first use personal, EI and CPP credits before being able to use these credits El & CPP s. 118.7 = El & CPP premiums @ 15% (El & CPP premiums will be given to you) - El Credit 15% x $856 = $128 MAX -CPP Credit - 15% * $2,732 = $410 MAX CANADA EMPLOYMENT CREDIT = 15% x lesser of employment income or $1,245 = $187 MAX DIVIDEND TAX CREDIT: - for eligible dividends - 6/11 of 38% gross-up - for other dividends from taxable Canadian corporations = 9/13 of 15% gross-up FIRST TIME HOMEBYER'S TAX CREDIT = 15% X $5,000 of a cost of a qualifying home ($750 MAX) CORPORATE TAXES: Basic corporate rate: 38% Federal abatement: (10%) Small business deduction (if applicable): (19%) General rate reduction (if applicable): (13%) QUESTION 1 [30 marks! Los Pasteles Verdes Ltd. ("the Company)has a fiscal year ending December 31. For the year ending December 31, 2020, the Company's income statement is as follows Revenues $950,000 Expenses: Cost Of Goods Sold 15206,000) Administrative Costs (157,000) Amortization Expense (173,000) Increase in warranty reserves (32,000) Other Expenses 187,000) 1650.000 Income Before Tax Expense $300.000 Income Tax Expense: Current 1536,0001 Future (22,000) (48.000 Net Income $252.000 Other Information: 1. During the year. $6,000 was spent on landscaping for its new facilities for accounting purposes this was capitalized as an asset. The Company believes the work has an unlimited life and has decided not to amortize this balance. 2. The Company incurred legal costs to make amendments to les articles of incorporation in 2020 These legal costs totalling $9.500 were included in Other Expenses 3. On January 1, 2020, the Company has UCC balances for its tangible assets as follows: Class 1 (4% CCA rate) $450,000 Class 14.1 (SX CCA rate) NE The Class 1 balance relates to a single building acquired in 2006 at a cost of 5600,000 including the surrounding land. The value and cost of the land at the time of acquisition was $50,000 On February 10, 2020, this building and the land are sold for a total of $662,000. The value of the land is unchanged at $50,000. In the accounting records, this real property was carried at $557,000, $507.000 for the building and $50,000 for the land. The resulting gain on the building is included in the accounting revenues. The old building is replaced on February 15, 2020 with a new building acquired at a cost of $733.000 of which $60.000 is allocated to land. The Company chose not to put the new building into a separate Class 1 so it does not quality for the 6 percent CCA rate. No elections are made with respect to the replacement of the building 4. The Company was late on paying some income tax instalments as well as some municipal tax payments, resulting in interest being incurred in the amounts of $540 and $320, respectively. This interest was included in Other Expenses 5. The Company would like to deduct the maximum CCA aliowable for the year. Page 1 of 2 Name Student No: Section: -REQUIRED A) Determine the 2020 minimum Net Income for Tax Purposes. Please calculate the January 1, 2021 UCC for all of The Company's CCA desses Show all of your work whether or not you feel it is relevant to your final answer. [15 Marks] B) Explain, in words, the reason for the inclusion for exclusion of each item in your calculation of the Company's net income in Part A. You can use point form. (15 Mars] INDIVIDUALS: TAX BRACKETS Taxable income Up to $48,535 In excess of $48,535 In excess of $97,069 In excess of $150,473 > $214,368 Tax 15% $7,280 plus 20.5% on the next $48,534 $17,230 plus 26% on the next $53.404 $31,115 plus 29% on the next $63,895 $49,645 plus 33% on the remainder TAX CREDITS BASIC CREDIT = $13,229 x 15% = $1,984 SPOUSE/SPOUSAL EQUIVALENT (ELIGIBLE DEPENDENT) -15% x ($13,229 minus spouse/eligible dependent's net income) =$1,984 MAX Base amount increased by $2,273 (to $15.502) if the spouse/eligible dependent is mentally or physically infirm. CANADA CAREGIVER FOR CHILD $17,085) = $1,091 MAX AGE CREDIT = 15% (S7,637 - 15% x (net income - $38,508)) = $1,146 MAX PENSION CREDIT=15% x Ist $2,000 of "pension income"= 5300 maximum (not indexed) ADOPTION CREDIT = 15% of Ist $16,563 of eligible adoption expenses = $2,484 MAX CHARITABLE DONATIONS = [(15%MA)] + [(33%)(B)] + [(29%)(C)) (not indexed), where A = the first $200 B = the lesser of 1) total gifts less $200 and 2) taxable income less $214,368 C=the excess, if any, by which the total donations exceed the sum of $200 plus amount B (eligible donations generally limited to 75% of net income) MEDICAL EXPENSE CREDIT = 15% ((B-C) + D) where B = eligible medical expenses of the taxpayer, spouse or minor dependants C= the lesser of 3% of the taxpayer's net income and $2,397 D-E-F E = eligible medical expenses of the adult dependant F=the lesser of 3% of the adult dependant's net income and $2,397 DISABILITY CREDIT = 15% x $8,576 = $1,286 X POLITICAL DONATION TAX CREDIT (not indexed) = 75% first $400, 50% next $350 and 1/3 next $525... (5650 max credit overall) EDUCATION-RELATED CREDITS (not indexed) (a) TUITION CREDIT = 15% x eligible tuition fees (b) STUDENT LOAN INTEREST = 15% of interest paid on qualifying student loans; 5 year carry forward by student TRANSFER OF UNUSED CREDITS TO SPOUSE AND OTHERS Tuition (to parents and grandparents if no spouse) Age (to spouse only) Pension (to spouse only) Disability to child, grandchild,parent , grandparent, brother, sister, aunt, uncle, nephew, niece of the taxpayer or the taxpayer's spouse) Dependent must first use personal, EI and CPP credits before being able to use these credits El & CPP s. 118.7 = El & CPP premiums @ 15% (El & CPP premiums will be given to you) - El Credit 15% x $856 = $128 MAX -CPP Credit - 15% * $2,732 = $410 MAX CANADA EMPLOYMENT CREDIT = 15% x lesser of employment income or $1,245 = $187 MAX DIVIDEND TAX CREDIT: - for eligible dividends - 6/11 of 38% gross-up - for other dividends from taxable Canadian corporations = 9/13 of 15% gross-up FIRST TIME HOMEBYER'S TAX CREDIT = 15% X $5,000 of a cost of a qualifying home ($750 MAX) CORPORATE TAXES: Basic corporate rate: 38% Federal abatement: (10%) Small business deduction (if applicable): (19%) General rate reduction (if applicable): (13%) QUESTION 1 [30 marks! Los Pasteles Verdes Ltd. ("the Company)has a fiscal year ending December 31. For the year ending December 31, 2020, the Company's income statement is as follows Revenues $950,000 Expenses: Cost Of Goods Sold 15206,000) Administrative Costs (157,000) Amortization Expense (173,000) Increase in warranty reserves (32,000) Other Expenses 187,000) 1650.000 Income Before Tax Expense $300.000 Income Tax Expense: Current 1536,0001 Future (22,000) (48.000 Net Income $252.000 Other Information: 1. During the year. $6,000 was spent on landscaping for its new facilities for accounting purposes this was capitalized as an asset. The Company believes the work has an unlimited life and has decided not to amortize this balance. 2. The Company incurred legal costs to make amendments to les articles of incorporation in 2020 These legal costs totalling $9.500 were included in Other Expenses 3. On January 1, 2020, the Company has UCC balances for its tangible assets as follows: Class 1 (4% CCA rate) $450,000 Class 14.1 (SX CCA rate) NE The Class 1 balance relates to a single building acquired in 2006 at a cost of 5600,000 including the surrounding land. The value and cost of the land at the time of acquisition was $50,000 On February 10, 2020, this building and the land are sold for a total of $662,000. The value of the land is unchanged at $50,000. In the accounting records, this real property was carried at $557,000, $507.000 for the building and $50,000 for the land. The resulting gain on the building is included in the accounting revenues. The old building is replaced on February 15, 2020 with a new building acquired at a cost of $733.000 of which $60.000 is allocated to land. The Company chose not to put the new building into a separate Class 1 so it does not quality for the 6 percent CCA rate. No elections are made with respect to the replacement of the building 4. The Company was late on paying some income tax instalments as well as some municipal tax payments, resulting in interest being incurred in the amounts of $540 and $320, respectively. This interest was included in Other Expenses 5. The Company would like to deduct the maximum CCA aliowable for the year. Page 1 of 2 Name Student No: Section: -REQUIRED A) Determine the 2020 minimum Net Income for Tax Purposes. Please calculate the January 1, 2021 UCC for all of The Company's CCA desses Show all of your work whether or not you feel it is relevant to your final answer. [15 Marks] B) Explain, in words, the reason for the inclusion for exclusion of each item in your calculation of the Company's net income in Part A. You can use point form. (15 Mars]
