Problem 12 ITA: 153, 162(1), 162(2), 212(1)(d), 233.3; ITR: On Janua 108(1.11); IC 77-16R4 ry 10, 2018, you started your new job as controller for Bordessa Corporation, a Canadiancontrolled private corporation with a December 31 year end. On your first day, the president and ownermanager of the company has asked you to follow up on some personal and corporate tax concerns that he has. (1) The company is the exclusive Canadian manufacturer and distributor of menswear designed by a famous U.S. designer and pays the designer a royalty equal to 10% of sales each quarter. Royalty payments are due one month after each quarter end (i.e., on April 30, July 31, October 31, and January 31). The company's financial statements show a 2017 royalty expense of $60,000. The financial statements also show the amount of royalties payable at the company's December 31, 2017 year end to be $20,000 (the comparable number for December 31, 2016 is $10,000). According to the company's 2017 cheque register, however, only $45,000 has been paid to the menswear designer and only $5,000 has been paid to the CRA. The president wants to know how much the company should remit when it makes its January 31, 2018 payment to make up for unpaid royalties and withholding taxes it owes in respect of 2017. (2) The company accrued a $100,000 bonus payable to the President on its financial statements. ITA: 78(3) This bonus was declared by way of a director's resolution at the company's Board of Directors' last 2017 meeting. The president understands that his bonus must be paid within 180 days after the year end in order for it to be deductible in 2017 and you have verified that this is correct. This is the first time the company has accrued such a bonus and the president wants to know the deadline for the remittance of payroll deductions on the bonus. You do a quick review of payroll remittances for 2016 and 2017 and find that they amounted to about $120,000 in each year. (3) The president tells you that he filed his 2016, 2015, and 2014 tax returns yesterday (January 9, 2018) after receiving a demand to file these returns in December 2017. He is expecting a net refund of $5,490 (see the schedule below). He wants to know whether he will be assessed any penalties for late filing and what the amount of the penalties will be. He tells you that his wife is a self-employed medical doctor. 14,875 492 Introduction to Federal Income Taxation in Canada Balance due (Refund $) 2014 ........... . (20,500) 2015 ........... . 10,000 2016 ........... . 5,010 Net refund expected (5,490) (4) During 2017, the president of the company inherited U.S. stock from a distant relative who lived in the U.S. The value of the stock at the date of the relative's death was C$120,000. The president has asked you if he has to report this on his 2017 tax return. The stock is held in safekeeping at a stockbroker's office in Toronto. Report your findings to the president.