Question 2 Corporate Tax Payable (30 Marks) D M Paper Company is a Canadian controlled private corporation (CCPC) The Company handles retail distribution or paper supplies The following Income Statement has been prepared to assist you in completing D M Paper Companys tax return for the year ending December 31, 2020 Revenues from Operations $5,300,000 Expenses from Operations (4,940,000) Income from Operations $ 360,000 Other Income 181,500 Income before Taxes $ 541,500 Income Tax Provision (41,500) Net Income $500,000 All of the revenues of D M Paper Company are earned in a province in Canada and are taxable during 2020 The Expenses from Operations balance includes the following amounts Depreciation expense of $250,000 For tax purposes, the controller tells you that the opening undepreciated tax balances (UCC) are as follows UCC Class 3 (5 ) $726,000 Class 8 (20 ) 472,000 Class 10 (30 ) 22,000 The balance in Class 10 reflects a single truck that was used for deliveries It had an original cost of $38,000 and a net book value for accounting purposes of $29,000 It was sold in 2019 for $10,000 and replaced with a leased truck The only other transaction involving depreciable assets during the year was the acquisition of $82,000 in Class 8 assets Interest on late income tax payments of $1,500 New financing costs for the new bond issuance $4,000 Charitable donation to the United Way Canada of $5,500 In addition, D M Paper Company provides you with the following other information 2020 Other Income includes Interest Revenue $105,000 from Canadian sources Portfolio Dividend $48,000 from Devon Corp Canadian Taxable crop Gain on Sale of property (other than depreciable) $28,500 (Property original cost was $22,250 net book value $13,750 and sold for $42,250) (Those amounts will be deducted if allowed) Amounts carryovers Net capital loss of $20,000 this was from 1998 Non capital loss of $ 11,250 this was from 2002 Charitable donation 3,000 this was from 2012 During 2020, a total of $97,000 in taxable dividends was paid to the shareholders of D M Paper Company Noting that non eligible RDTOH balance at Jan 1, 2020 was $100,000 and there is no dividend refund during 2019 D M Paper Company is associated with another 2 corporation, therefore agree to share the annual SBD business limit (60 for DM) Required Show all the calculations used to provide the required information, including those for which the result is nil Round your answers to the nearest whole number A Calculate D M Paper Companys minimum Net Income for Tax Purposes and Taxable Income for the year ending December 31, 2020 (16 marks) B Calculate the minimum Part I tax payable , Part IV tax payable and dividend refund at Dec 31, 2020 (14 Marks)

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Question 2 Corporate Tax Payable (30 Marks) D.M. Paper Company is a Canadian controlled private corporation (CCPC). The Company handles retail distribution or paper supplies.

Question 2 Corporate Tax Payable (30 Marks)

D.M. Paper Company is a Canadian controlled private corporation (CCPC). The Company handles retail distribution or paper supplies. The following Income Statement has been prepared to assist you in completing D.M. Paper Companys tax return for the year ending December 31, 2020:

Revenues from Operations $5,300,000

Expenses from Operations (4,940,000)

Income from Operations $ 360,000

Other Income 181,500

Income before Taxes $ 541,500

Income Tax Provision (41,500)

Net Income $500,000

All of the revenues of D.M. Paper Company are earned in a province in Canada and are taxable during 2020.

The Expenses from Operations balance includes the following amounts:

Depreciation expense of $250,000. For tax purposes, the controller tells you that the opening undepreciated tax balances (UCC) are as follows:

UCC

Class 3 (5%) $726,000

Class 8 (20%) 472,000

Class 10 (30%) 22,000

The balance in Class 10 reflects a single truck that was used for deliveries. It had an original cost of $38,000 and a net book value for accounting purposes of $29,000. It was sold in 2019 for $10,000 and replaced with a leased truck.

The only other transaction involving depreciable assets during the year was the acquisition of $82,000 in Class 8 assets.

Interest on late income tax payments of $1,500
New financing costs for the new bond issuance $4,000.
Charitable donation to the United Way/ Canada of $5,500.

In addition, D.M. Paper Company provides you with the following other information:

2020 Other Income includes Interest Revenue $105,000 from Canadian sources; Portfolio Dividend $48,000 from Devon Corp. Canadian Taxable crop; Gain on Sale of property (other than depreciable) $28,500 (Property original cost was $22,250; net book value $13,750; and sold for $42,250) (Those amounts will be deducted if allowed)

Amounts carryovers:

Net-capital loss of $20,000 this was from 1998.
Non-capital loss of $ 11,250 this was from 2002.
Charitable donation 3,000 this was from 2012.

During 2020, a total of $97,000 in taxable dividends was paid to the shareholders of D.M. Paper Company. Noting that non-eligible RDTOH balance at Jan 1, 2020 was $100,000 and there is no dividend refund during 2019.
D.M. Paper Company is associated with another 2 corporation, therefore agree to share the annual SBD business limit (60% for DM).

Required: Show all the calculations used to provide the required information, including those for which the result is nil. Round your answers to the nearest whole number.

A: Calculate D.M. Paper Companys minimum Net Income for Tax Purposes and Taxable Income for the year ending December 31, 2020. (16 marks)

B: Calculate the minimum Part I tax payable, Part IV tax payable and dividend refund at Dec 31, 2020 (14 Marks)