Income Tax II Profile Assignment

Sandrock Industries Ltd (SIL) is a Canadian controlled private corporation, located at 1040 Rocky Shore

Road, Toronto, ON M1M 1J1. Its Ontario corporation tax account number is 1234567, and its business

number is 499499499RC0001. Its phone number is 4167466000. It was incorporated on February 25,

1990 in Toronto Ontario.

The company has 1000 common shares issued and outstanding, all of which are held by Randy Sandrock,

SIN 994994994.

Mr Sandrock, is the president and sole director of the company, and is the person who should be

contacted with respect to matters concerning the companys books and records. He is the authorized

person and also the signing officer.

SIL is a retailer of stone and rock, for construction projects. All of its sales occur within Canada. It has

net assets of $300,000 on December 31, 2019.

SIL is the shareholder of 500 common shares of Rockstar Inc. The common shares have a book value of

$1,200,000. Rockstar Inc. is situated in the same location as SIL. It also has a December 31, 2019 year

end. Its business number is 000000000RC0001.

Rockstar Inc has an active business of selling polished stones. It has total assets as of December 31,

2019 of $2,000,000, total revenue of $500,000. Its taxable capital was $350,000 at the end of

December 31, 2018.

Details that pertain to SIL at the end of December 31, 2018 are as follows:

Taxable Capital employed in Canada $325,000

RDTOH balance $ 5,000

Dividends declared and paid in 2017 nil

GRIP balance $ 11,750

Non capital loss balance carried over from 2015 $ 10,000

Capital Dividend account $ 6,000

(pertaining to of a capital gain reported in 2016)

Income statement for the year ended December 31, 2019 is as follows:

Sales Revenue $600,000

Interest on Long term deb t 25,000

Interest on Foreign Bank Account (note 1) 18,000

Eligible dividends from TDCanadatrust 15,000

Non eligible dividends from Rockstar Inc. (note 2) 50,000

Gain on Sale of Shares (note 3) 25,000

Total Revenue $733,000

Total cost of goods sold $250,000

Amortization expense 120,000

Other operating expenses 150,000

Income tax provision 40,000

Net income $173,000

Note 1: This interest is net of $2,000 in taxes withheld in Ireland

Note 2: As a result of paying this $50,000 dividend to SIL, Rockstar Inc received a dividend refund of

$10,000

Note 3: On March 25, 2019, SIL sold 3,000 shares of TD Canadatrust. The common shares had cost

$150,000 on June 25, 2013 and were sold for proceeds of $175,000.

Balance Sheet as at December 31, 2019 is as follows:

Cash in the bank $100,000

Accounts receivable $ 50,000

Net Capital assets $150,000

Current Liabilities $ 50,000

Due to shareholder $ 75,000

Common shares $ 1,000

Retained earnings $174,000

Other information:

1. Other operating expenses include the following:

1. Charitable donations to Canadian Cancer Society in the amount of $5,000.
2. Penalties of $3,500 from CRA HST late payments.
3. Meals and entertainment of $35,000
4. Life insurance on the life of Mr Sandrock, $3,000
5. Bad debts expenses including $3000 of accounts that are truly bad, and $2,500 which are

doubtful.

2.During the year, SIL incurred $20,000 in landscaping costs. For accounting purposes these were

treated as a capital asset, to be amortized using the straight-line method over 10 years. This has been included in amortization expense.

3. Opening UCC balances included

a. Class 1 $246,000

b. Class 8 $130,000

c. Class 10 $100,000

4. A truck that cost $30,000 was sold for $10,000 during the year. The only fixed asset purchase

was a new office suite costing $20,000.

5. During 2019, SIL paid taxable dividends of $90,000. Of these dividends, $25,000 were

designated as eligible. On September 15, 2019, SIL elected to pay the maximum capital

dividend allowable.

6. SIL allocated $250,000 of the annual business limit to Rockstar Inc. The remaining business limit

is allocated to SIL.

7. SIL paid quarterly income tax instalments of $10,000 each on March 31, June 30 Sept 30 and Dec

31.

REQUIRED:

Prepare the federal corporate tax return for SIL for the 2019 taxation year, using the Profile T2

corporate software program.

You should have enough information to fill out the GIFI schedule 125, and schedule 100.

You need to at the minimum, fill out schedule 1,2,3,5,6,7,8 and possibly a few more.