Question 6 (10 marks) Aggressive Inc. (Al), an owner-managed company, desires to pay as Title tax as possible. Al is known to push the limits when it comes to deducting expenses. Al has provided the following income statement to aid in determining its taxable income for 2021: Sales $750,000 Cost of goods sold [250,000) Gross profit 500,000 Operating expenses Salaries Note 1 (374,000) Advertising Note 2 (76,500) Administrative Note 3 (26,700) Depreciation Note 4 (65,000) Property tax Note 5 (12,660) Interest Note 5 (5,400) Donations Note 6 (1,000) (561,260) Net operating loss (61,260) Investment income Note 7 12.000 Netlos before tax Note 8 $149.2600 Note 1: Al has accrued bonuses of $60,000 each for the owner manager's two children (aged two and three) Note 2: Advertising expense includes meals and entertainment expenses of $23,600. It also includes the payment of a golf club membership fee of $2,800 for the owner-manager. Advertising expense includes $5,000 paid for one of Al's managers to attend an international sales convention in the south of Spain. Al does NOT sell any of its products Internationally and has NO customers in Spain. Note 3: Administrative expense includes the payment of $500 of speeding tickets on behalf of Al's sales manager In addition, administrative expense includes $2.500 paid for a laptop in February 2021 This amount has NOT been capitalized, and NO capital costalowance (CCA) has been taken on the asset Administrative expense also includes the payment of $3,650 in life insurance premium on the owner-manager. One policy with a $1.250 premium was required by Al's bank in Setting up Al's line of credit. The remaining $1,400 was put in place to assist the owner-manager's family to pay any taxes due on the death of the owner-manager. Note 4: Al has properly calculated the CCA on its capital assets at $53,000, with the exception of the laptop purchase (Class 50,55%) above. During the year, Al incurred $19.300 in landscaping costs for its head office building. Alls controller insisted that this amount be added to the cost of the land. Note : Al has invested in vacant land that remains unused and unrented at the end of the year. Al incurred the following costs associated with this land during the year and included these amounts in the income statement above: Property tax $1,750 Interest $1,200 Note 6: Al made a donation to a local charity, the Humanitarian Action Fund, for $1,000. Note 7: Al received dividends from other taxable Canadian corporations of $12.000 Note 8: Al has unused non-capital loss carryforwards of $14.700. Required: a) Determine Alls minimum net income for tax purposes for 2021. (8 marks) b) Determine Al's minimum taxable income for 2021. (2 marks) Question 6 (10 marks) Aggressive Inc. (Al), an owner-managed company, desires to pay as Title tax as possible. Al is known to push the limits when it comes to deducting expenses. Al has provided the following income statement to aid in determining its taxable income for 2021: Sales $750,000 Cost of goods sold [250,000) Gross profit 500,000 Operating expenses Salaries Note 1 (374,000) Advertising Note 2 (76,500) Administrative Note 3 (26,700) Depreciation Note 4 (65,000) Property tax Note 5 (12,660) Interest Note 5 (5,400) Donations Note 6 (1,000) (561,260) Net operating loss (61,260) Investment income Note 7 12.000 Netlos before tax Note 8 $149.2600 Note 1: Al has accrued bonuses of $60,000 each for the owner manager's two children (aged two and three) Note 2: Advertising expense includes meals and entertainment expenses of $23,600. It also includes the payment of a golf club membership fee of $2,800 for the owner-manager. Advertising expense includes $5,000 paid for one of Al's managers to attend an international sales convention in the south of Spain. Al does NOT sell any of its products Internationally and has NO customers in Spain. Note 3: Administrative expense includes the payment of $500 of speeding tickets on behalf of Al's sales manager In addition, administrative expense includes $2.500 paid for a laptop in February 2021 This amount has NOT been capitalized, and NO capital costalowance (CCA) has been taken on the asset Administrative expense also includes the payment of $3,650 in life insurance premium on the owner-manager. One policy with a $1.250 premium was required by Al's bank in Setting up Al's line of credit. The remaining $1,400 was put in place to assist the owner-manager's family to pay any taxes due on the death of the owner-manager. Note 4: Al has properly calculated the CCA on its capital assets at $53,000, with the exception of the laptop purchase (Class 50,55%) above. During the year, Al incurred $19.300 in landscaping costs for its head office building. Alls controller insisted that this amount be added to the cost of the land. Note : Al has invested in vacant land that remains unused and unrented at the end of the year. Al incurred the following costs associated with this land during the year and included these amounts in the income statement above: Property tax $1,750 Interest $1,200 Note 6: Al made a donation to a local charity, the Humanitarian Action Fund, for $1,000. Note 7: Al received dividends from other taxable Canadian corporations of $12.000 Note 8: Al has unused non-capital loss carryforwards of $14.700. Required: a) Determine Alls minimum net income for tax purposes for 2021. (8 marks) b) Determine Al's minimum taxable income for 2021. (2 marks)
