Required: Determine the minimum 2022 taxable income and foderal income tax payable for Lorne Inc. Show all calculations, whother or not they are necessary to the final solution. As the corporation carries on business in a province through a PE and that province provides additional M\&P tax incentives, a separate calculation of the federal MSP deduction is required. AP 12-10 (Comprehensive Corporate Income Tax Payable) Kalex Inc, a CCPC, Was incorporated in 2020 and chose a December 31 taxation year end. Kalex is a family-owned company with four equbl shareholders, all of whom are siblings. The company employs in excess of 50 employees at its head office in Toronto, a further 80 employees at its manufacturing facility in Oshawa, Ontario, and a further 12 employees at its office in Syracuse. New York. The company is primarily involved in the manufacture and sale of storage shelving and pallets. You have been asked to prepare the 2022 corporate income tax returns. The company provides you with its financial statements for the vear ending December 31,2022 . The financial statements have been prepared using accounting standards for private enterprises (ASPE), which represents the application of generaly bccepted accounting principles. No attempt has been made to reconcile the net accounting income with net income for ITA purposes. Through your own observations and by asking several questions you have uncovered the following information concerning the 2022 income and expenses of Kalex 1. Net income for accounting purposes is $2,481.986 after deducting $325.000 of current income tax expenses. 2. Other amounts either deducted or added in the determination of net income for accounting numnease ara as finlimuse: accounts totalled $450,000, resulting in a doubtu doemine that a reasonable reserve that would be acceptable to CFA would be 528.800 . The 2021 reant in 2022. and no adjustment has been made to the 4. On January 1, 2022, Kalex had the following UCC balances: Elections were filed for each of the class 1 buldings to be eligible for additional CCA. As a result, the two buildings are in separate classes. The Oshawa building is used 100% for non-residential purposes that is manufacturing while the Toronto headquarters building is used exclusively (100%) for non-residential purposes that is not manufacturing. No capital expenditures were made for the Oshawa bulding, but capital renowations in the amount of $112,000 were made to the Toronto building. This amount has been deducted for accounting purposes. The amount includod in each class represents the capital cost of the building only and not the land. Class 8 depreciable property represents office furniture for the two class 1 buldings. The original cost when acquired in January 2020 was $900,000. Kalex was approached by a new business in February 2022 coperasing out of Nisgara Falls, Ontario. The business leases refurbished office furniture on long-term leases. After a round of negotiations and running the numbers, Kalex has decided to replace all of their class 8 property with loased property. Kalox signed a five year contract at $4,000 monthly. In exchange. Kalex will receive $700,000 for all of its class 8 property. Kalex correctly expensed the lease puyments in 2022. The class 10 property is composed of three two-seater delivery vans with extra storage capacity. Each of the three vans cost $75,000. After hearing of the tax incentives for zeroemission vehicles and the expanding network of charging stations, the compary decided to trade in the throe existing vans for three zeroemission vans that cost $95,000 each. The vans were purchased on July 2,2022 . The company received $105,000 as a tradein allowance for the three existing vans. The company acquired a 2022 Tesla Model S in early January 2022 for $130,000. The car is used exclusively by the company president. It is estimated that the car is used by the president 40% of the time for company business. Midway through 2020 the company realized that the Oshawa facility lacked the necussary storage space to accommodrte its expanding inventony. They reached out to a local developer who agreed to lease the company a warehouse that had sat empty for a few years. A five-year lease was signed with a renewal cotion for an additional five yeurs. The lease provides that Kalex can make any improvements or renovations it considers necessary but that no payment will be made by the lessor at the end of the lease as compensation for those improvements. The company spent $140,000cn modifications in 2020 and another $150,000 in July of 2022 . Assume that the expenditures are categorized as class 13. In March of 2022 Kalex purchased a client list for $80,000 from a local competitor who was on the verge of closing its doors. In May of 2022 the company purchased new manufacturing machinery for $900,000 that would double its output at the Oshawa facility. Company policy is to claim the maxmum CCA in euch yeat. 5. When the company began cperasions in early 2020 it purchased a vacant lot not far from the Oshowa facility for $150,000. The plan was to eventually build a warehouse, but the compon opted to lease a warehouse instead. The company, as part of the leasing arrangement agted to sell the land to the lessor for $460,000. The arrangements required the purchaser to pay $175,000 on the closing date, February 1,2022 , with the remainder paid in three equal instalments of $100,000 each plus interest at 6% on January 31,2023,2024, and 2025. Kalex did not carry a mortgage on the vacant land but did incur municipal property taxes from the day it purchased the land to the day of sale in the amount of $11,700. No income was earned from the vacant land throughout the period of ownership, and as a result the municipal property taxes have not been deducted for income tax purposes. Selling costs of the land were $8,300. The only adjustment made by the company for this transaction was the add tion of an accounting gain of $290,000. The capital gain and accounting gain are determined in the exact same manner and are identical. 6. In late 2020 Kalex purchased 25% of the shares of Jennco Ltd, an arm's-longth "small business corporation" for $125,000. Kalex had plans to eventualy purchase a controlling interest and combine the two companies, but larger competitive companies moved in, taking over the market and the share value began to decline rapidy. Kalex managed to sell the shares to an arm's-length investor for $10,000 three months before the company declared bankruptcy. Selling costs were $1,600. Kalex deducted an accounting loss on the shares of $116,600. Jennco never paid any dividends (taxable or capital) while Kalex owned the shares. 7. The portion of Kalex's taxable income that is considered to be earned in Canada using the formula in ITR 400 for the federal abatement is 83.6%. 8. The U.S. business operations resulted in net profits of C $410,000. Kalex paid U.S. income taxes on those profits of C 577,900 . For accounting purposes, howevec, the company only added the U.S. profits in excess of the U.S. income taxes, or $332,100$410,000$779001. 9. Kalex has no non-capital losses but experienced a net capital less of $52,000 in 2021 on the sale of investments in public compary shares. 10. Kalex's active business income in 2022 is $1,815,000,$1,289,000 of which represents its Canadian M\&P profits. 11. Kalex has been associated with one other CCPC since its incorporation in 2020. Both compa: nies have a December 31 taxation year end and hove shared the annual small business limit equally and will continue to do so for 2022 . The TCEC of the associated group in 2021 was $11.0 million and is $12.2 milion in 2022 . In addition, the AAll of the associated group in 2021 was $77,500 and is $92,300 in 2022 . Required: A. Calculate the minimum 2022 net income for Kalex with a reconcilation that begins with net: accounting income before income taves of $2,491,986. Make all necessary adfustments, including CCA for each class of property together with the UCC balance as of January 1,2023. Show all supporting calculations. B. Calculate the minimum 2022 taxable income for Kalex. Indicate the amount and type of any carry overs that are aveilable at the end of the year. C. Calculate the minimum 2022 federal income tax payble for Kalex. The province of Ontario is one of two provinces and one ternitory in Canada (Saskatchewan, and Yukion are the others] that provides a reduced income tax rate for MBP activity. The determination of the MBP credits in those jurisdictions uses the federal calculations, and as a result a separate calculation of the federal M\&P deduction is required. D. Assume (1) that the foreign tax credit for foreign business income is equal to the foreign income taxes paid of $77,900 and (2) that the additional refundable tax (ART) is equal to 102/3% of aggregate investment income of $16,500. Required: Determine the minimum 2022 taxable income and foderal income tax payable for Lorne Inc. Show all calculations, whother or not they are necessary to the final solution. As the corporation carries on business in a province through a PE and that province provides additional M\&P tax incentives, a separate calculation of the federal MSP deduction is required. AP 12-10 (Comprehensive Corporate Income Tax Payable) Kalex Inc, a CCPC, Was incorporated in 2020 and chose a December 31 taxation year end. Kalex is a family-owned company with four equbl shareholders, all of whom are siblings. The company employs in excess of 50 employees at its head office in Toronto, a further 80 employees at its manufacturing facility in Oshawa, Ontario, and a further 12 employees at its office in Syracuse. New York. The company is primarily involved in the manufacture and sale of storage shelving and pallets. You have been asked to prepare the 2022 corporate income tax returns. The company provides you with its financial statements for the vear ending December 31,2022 . The financial statements have been prepared using accounting standards for private enterprises (ASPE), which represents the application of generaly bccepted accounting principles. No attempt has been made to reconcile the net accounting income with net income for ITA purposes. Through your own observations and by asking several questions you have uncovered the following information concerning the 2022 income and expenses of Kalex 1. Net income for accounting purposes is $2,481.986 after deducting $325.000 of current income tax expenses. 2. Other amounts either deducted or added in the determination of net income for accounting numnease ara as finlimuse: accounts totalled $450,000, resulting in a doubtu doemine that a reasonable reserve that would be acceptable to CFA would be 528.800 . The 2021 reant in 2022. and no adjustment has been made to the 4. On January 1, 2022, Kalex had the following UCC balances: Elections were filed for each of the class 1 buldings to be eligible for additional CCA. As a result, the two buildings are in separate classes. The Oshawa building is used 100% for non-residential purposes that is manufacturing while the Toronto headquarters building is used exclusively (100%) for non-residential purposes that is not manufacturing. No capital expenditures were made for the Oshawa bulding, but capital renowations in the amount of $112,000 were made to the Toronto building. This amount has been deducted for accounting purposes. The amount includod in each class represents the capital cost of the building only and not the land. Class 8 depreciable property represents office furniture for the two class 1 buldings. The original cost when acquired in January 2020 was $900,000. Kalex was approached by a new business in February 2022 coperasing out of Nisgara Falls, Ontario. The business leases refurbished office furniture on long-term leases. After a round of negotiations and running the numbers, Kalex has decided to replace all of their class 8 property with loased property. Kalox signed a five year contract at $4,000 monthly. In exchange. Kalex will receive $700,000 for all of its class 8 property. Kalex correctly expensed the lease puyments in 2022. The class 10 property is composed of three two-seater delivery vans with extra storage capacity. Each of the three vans cost $75,000. After hearing of the tax incentives for zeroemission vehicles and the expanding network of charging stations, the compary decided to trade in the throe existing vans for three zeroemission vans that cost $95,000 each. The vans were purchased on July 2,2022 . The company received $105,000 as a tradein allowance for the three existing vans. The company acquired a 2022 Tesla Model S in early January 2022 for $130,000. The car is used exclusively by the company president. It is estimated that the car is used by the president 40% of the time for company business. Midway through 2020 the company realized that the Oshawa facility lacked the necussary storage space to accommodrte its expanding inventony. They reached out to a local developer who agreed to lease the company a warehouse that had sat empty for a few years. A five-year lease was signed with a renewal cotion for an additional five yeurs. The lease provides that Kalex can make any improvements or renovations it considers necessary but that no payment will be made by the lessor at the end of the lease as compensation for those improvements. The company spent $140,000cn modifications in 2020 and another $150,000 in July of 2022 . Assume that the expenditures are categorized as class 13. In March of 2022 Kalex purchased a client list for $80,000 from a local competitor who was on the verge of closing its doors. In May of 2022 the company purchased new manufacturing machinery for $900,000 that would double its output at the Oshawa facility. Company policy is to claim the maxmum CCA in euch yeat. 5. When the company began cperasions in early 2020 it purchased a vacant lot not far from the Oshowa facility for $150,000. The plan was to eventually build a warehouse, but the compon opted to lease a warehouse instead. The company, as part of the leasing arrangement agted to sell the land to the lessor for $460,000. The arrangements required the purchaser to pay $175,000 on the closing date, February 1,2022 , with the remainder paid in three equal instalments of $100,000 each plus interest at 6% on January 31,2023,2024, and 2025. Kalex did not carry a mortgage on the vacant land but did incur municipal property taxes from the day it purchased the land to the day of sale in the amount of $11,700. No income was earned from the vacant land throughout the period of ownership, and as a result the municipal property taxes have not been deducted for income tax purposes. Selling costs of the land were $8,300. The only adjustment made by the company for this transaction was the add tion of an accounting gain of $290,000. The capital gain and accounting gain are determined in the exact same manner and are identical. 6. In late 2020 Kalex purchased 25% of the shares of Jennco Ltd, an arm's-longth "small business corporation" for $125,000. Kalex had plans to eventualy purchase a controlling interest and combine the two companies, but larger competitive companies moved in, taking over the market and the share value began to decline rapidy. Kalex managed to sell the shares to an arm's-length investor for $10,000 three months before the company declared bankruptcy. Selling costs were $1,600. Kalex deducted an accounting loss on the shares of $116,600. Jennco never paid any dividends (taxable or capital) while Kalex owned the shares. 7. The portion of Kalex's taxable income that is considered to be earned in Canada using the formula in ITR 400 for the federal abatement is 83.6%. 8. The U.S. business operations resulted in net profits of C $410,000. Kalex paid U.S. income taxes on those profits of C 577,900 . For accounting purposes, howevec, the company only added the U.S. profits in excess of the U.S. income taxes, or $332,100$410,000$779001. 9. Kalex has no non-capital losses but experienced a net capital less of $52,000 in 2021 on the sale of investments in public compary shares. 10. Kalex's active business income in 2022 is $1,815,000,$1,289,000 of which represents its Canadian M\&P profits. 11. Kalex has been associated with one other CCPC since its incorporation in 2020. Both compa: nies have a December 31 taxation year end and hove shared the annual small business limit equally and will continue to do so for 2022 . The TCEC of the associated group in 2021 was $11.0 million and is $12.2 milion in 2022 . In addition, the AAll of the associated group in 2021 was $77,500 and is $92,300 in 2022 . Required: A. Calculate the minimum 2022 net income for Kalex with a reconcilation that begins with net: accounting income before income taves of $2,491,986. Make all necessary adfustments, including CCA for each class of property together with the UCC balance as of January 1,2023. Show all supporting calculations. B. Calculate the minimum 2022 taxable income for Kalex. Indicate the amount and type of any carry overs that are aveilable at the end of the year. C. Calculate the minimum 2022 federal income tax payble for Kalex. The province of Ontario is one of two provinces and one ternitory in Canada (Saskatchewan, and Yukion are the others] that provides a reduced income tax rate for MBP activity. The determination of the MBP credits in those jurisdictions uses the federal calculations, and as a result a separate calculation of the federal M\&P deduction is required. D. Assume (1) that the foreign tax credit for foreign business income is equal to the foreign income taxes paid of $77,900 and (2) that the additional refundable tax (ART) is equal to 102/3% of aggregate investment income of $16,500