Question 4 - 45 minutes

The following information has been gathered from the working paper files of OTOHLtd. for its fiscal year ending on December 31, 2020. The corporation is a Canadian-controlled private corporation involved in residential rentals and cleaning services. Mr. Toh is the sole shareholder and all work is done by him and his wife. He has been in this business for the past 20 years and has built up quite a nice nest egg. He has decided that this is the year for him to take some big dividends and enjoy life, because you never know.

Cleaning services	$246,000
Interest income from Canadian sources (Note 2)	54,000
Dividends from taxable Canadian corporations (Note 3)	107,200
Taxable capital gains on sale of a rental building	70,000
Recapture of CCA on the sale of the rental building	20,000
Net Rental income	35,000
Division B income (income for tax purposes)	$532,200

Notes and additional information:

1. The company has an unused net capital loss of $25,000 from 2018.
2. The Canadian interest is from the following sources:

   Long term bond investment	$50,000
   Bank interest on fluctuating cash working capital	4,000
   	$54,000

3. Dividends received during 2020:

   Eligible dividends from non-connected companies	$40,200
   Non-Eligible Dividends from NERDOTH Ltd., a 80% owned subsidiary, which resulted in a total dividend of $13,400 to NERDOTH Ltd	67,000
   	$107,200

4. The company has agreed to allocate all of the annual business limit to its subsidiarys company.
5. The balance in the Refundable Dividend Tax on Hand (non eligible), on December 31, 2019, was $40,000, before the Dividend Refund (non-eligible) of $18,000 for the 2019 year.
6. The balance in the Refundable Dividend Tax on Hand (eligible), on December 31, 2019, was $10,000. No eligible dividends were paid for the 2019 year.
7. The GRIP Balance at December 31, 2019 was $20,000.

Required:

Determine for OTOH Ltd., by clearly presenting all component parts and their calculations:

1. Taxes Payable for the year ending December 31, 2020 (10 marks)
2. What would be the optimum/maximum Eligible dividend and Non-Eligible dividend that Mr. Toh can declare for the year ending December 31, 2020, in order for the company to get the entire ending balances of the respective RDTOHs as dividend refunds and without incurring any negative corporate tax effects (15 marks)