Instructions

The objective of this assignment is for students to prepare a T2 Corporation Income Tax Return.

Use profile software

Barry and Robyn Adams formed Salcome Limited ("SL") on January 1, 2019. The company sells

designer eye-glasses through its store in Oakville, ON. SL has a December 31 year-end.

Barry and Robyn have engaged you and your partner(s) to prepare the 2022 T2 Corporation Income

Tax Return for SL.

Please submit only the following forms

Form T2 Corporation Income Tax Return ("Form T2"). At line 760 of Form T2, enter

'$41,000' for the provincial or territorial tax.

Schedule 1 - Net Income (Loss) For Income Tax Purposes

Schedule 8 - Capital Cost Allowance (CCA)

Schedule 50 - Shareholder Information

1. The address of SL's head office (same as its mailing address) is:

106 Lakeshore Boulevard

Oakville, ON

L6H 2E8

The books and records have been maintained at the same address since the formation of the

company. SL's business number is 85631 0047 RC0001

2. Barry and Robyn are resident in Canada for tax purposes and each individual owns 50% of

the common shares of SL. The company has not issued any preferred shares. The social

insurance number (SIN) for each shareholder is:

Barry Smith - 506 990 397

Robyn Smith - 508 487 215

3. The authorized signing office of the corporation is the CFO, Zach Smith. His phone number

is (416) 978-9000 and he is the contact person for matters relating to SL's income tax

return.

4. The controller of SL has prepared the accounting income statement for the year ended

December 31, 2022:

Salcome Limited

Income Statement

For the year ended December 31, 2022

Sales $ 1,658,000

Cost of sales $ 650,000

Administrative expenses 425,000 1 ,075,000

Operating income $ 583,000

Other income and expenses 225,000

$ 808,000

Provision for income taxes 121,200

Net income $ 686,800

5. The following items were included in the calculation of "Administrative expenses":

a. Interest on late income tax payments of $210.

b. Donations to various registered charities of $15,000.

c. Depreciation and amortization tangible assets of $98,000.

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6. The following items were included in the calculation of "Other income and expenses":

a. Gain on sale of Bell Canada shares that were purchased for $80,000 and sold for

$98,000.

b. Accrued bonuses of $14,000 that was paid on January 3, 2023.

c. Interest income on overdue accounts receivable of $1,250.

d. Reserve for warranty claims of $5,000. The actual warranty claims for the year

amounted to $8,500.

e. Dividends from taxable Canadian corporations (non-connected) of $13,000.

f. Dividend from ABC Co (a connected corporation) of $10,000 (as described under

item 7 below).

g. Toronto Maple Leafs hockey game tickets given to customers of $3,000.

7. SL owns 90% of the common shares in the capital stock of ABC Co. and has allocated

$105,000 of the business limit to ABC Co. SL received a $10,000 non-eligible dividend from

ABC Co. during 2022. ABC Co. received a dividend refund from its NERDTOH of $1,700 as a

result of paying the dividend.

8. The balances in the tax accounts as at January 1, 2022 were:

a. Non-capital losses carried forward of $34,000.

b. Net capital losses carried forward of nil.

c. NERDTOH balance of $2,500.

9. The 2021 income tax return shows the following account balances from Schedule 8:

Depreciable property - UCC

Class 8 32,000

Class 10 78,000

Class 12 2,500

10. On May 31, 2022, fixtures and equipment were sold for proceeds of $15,000 (the original

cost was $35,000).

11. A delivery truck was purchased at a cost of $85,000 plus HST.

12. As at December 31, 2022, there are assets remaining in each of the three CCA classes.

13. SL paid a $25,000 non-eligible taxable dividend on December 31, 2022.

14. SL made installments totaling $138,000 in respect of its 2022 taxation year.

15. In the previous year the adjusted aggregate investment income was below $50,000 and the

taxable capital of the associated group was below $10,000,000.