Question
Sandcom Inc. is an Alberta corporation that qualifies as a Canadian controlled private company. For the taxation year ending December 31, 2018, the components of
Sandcom Inc. is an Alberta corporation that qualifies as a Canadian controlled private company. For the taxation year ending December 31, 2018, the components of its Net Income for Tax Purposes and Taxable Income are as follows:
Active Business Income (Note 1) | $329,000 |
Gross Foreign Business Income | 40,800 |
Gross Foreign Non-Business Income | 31,200 |
Interest On Long-Term Investments | 49,900 |
Taxable Capital Gains ((1/2)($34,000 )) | 17,000 |
Eligible Dividends Received On Portfolio Investment | 24,000 |
Net Income For Tax Purposes | $491,900 |
Eligible Dividends Received | (24,000) |
Charitable Contributions | (87,400) |
Net Capital Loss Carry Forward Deducted | (14,400) |
Non-Capital Loss Carry Forward Deducted | (263,000) |
Taxable Income | $103,100 |
Note 1 As determined by the Income Tax Regulations, $142,000 of this active business income was manufacturing and processing profits.
Note 2 Foreign jurisdictions withheld $6,120 from the foreign business income and $7,800 from the foreign non-business income.
Other Information:
- 1. During the year ending December 31, 2018, Sandcom used its existing cash resources to pay taxable dividends of $223,200. Of this total, $49,300 was designated as eligible.
- 2. As of December 31, 2017, Sandcom Inc. has a GRIP of $39,360. During 2017, the company designated $16,500 of its dividends paid as eligible.
- 3. As of December 31, 2017, the balance in Sandcom's RDTOH account was $26,400. A dividend refund of $13,400 was claimed in the 2017 corporate tax return.
- 4. As determined by the Income Tax Regulations, 85 percent of Sandcom's Taxable Income can be allocated to a Canadian province.
Required:
Show all of the calculations used to provide the following required information, including those for which the result is nil.
- A. Calculate Sandcom's Part IV Tax Payable for the year ending December 31, 2018.
- B. Assume that the foreign business and non-business tax credits are equal to the foreign taxes withheld. Calculate Sandcom's minimum Part I Tax Payable for the year ending December 31, 2018. As the corporation operates in a province that has a reduced rate for M&P activity, a separate calculation of the federal M&P deduction is required.
- C. Assume the foreign business and non-business tax credits are equal to the foreign taxes withheld. Calculate Sandcom's dividend refund for the year ending December 31, 2018.
- D. Determine the December 31, 2018 balance in Sandcom's GRIP account.
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