You have been presented with income tax information from your client, Katherine Marlowe, the $100\%$ shareholder of Beans and Greens Ltd$.,($BGL$)$ who asked you to determine BGL$$s net corporate tax payable using the information provided. As the filing deadline looms, you will need to begin working on this file immediately.

Client Information

Beans and Greens Ltd$.,($BGL$)$ a Canadian Controlled Private Corporation $($CCPC$),$ is a popular organic plant$-$based coffee house and bakery that started in Vancouver Island on January $1,2021.$ It has experienced enormous growth since then and is planning to expand in $2024.$ BGL$$s increased popularity is due to its trendy location, diverse fair trade organic coffee options, and delicious vegetarian and vegan baked goods. BGL locally sources fresh ingredients for all of its baked goods and has established supply partnerships with many of the local farms. Many of its popular baked goods are sold to larger retailers on the island. BGL struggled to keep up with the increasing retail demand so in mid$-2023$ it expanded its small kitchen to an offsite location serviced with commercial baking and packaging equipment, and refrigerated storage space.

At December $31,2023,$ the company$$s year$-$end, all of the outstanding shares were owned by Katherine Marlowe, the founder of BGL$.$ Financial statements for the year ended December $31,2023,$ report a net income before tax of $$456,000.$

You have been retained to estimate the corporation$$s income tax liability and provide advice on other tax matters and have gathered the information outlined in Exhibit $2-1.$

Required

Under Part I of the Income Tax Act, calculate Beans and Greens Ltd$.$s minimum net income for tax purposes and minimum taxable income for the $2023$ taxation year in accordance with the ordering provisions found in section $3$ of the Income Tax Act $(25$ marks$).$

Based on your answer to part $($a$),$ calculate the minimum Part I and Part IV federal income tax, and RDTOH for the $2023$ taxation year $(10$ marks$).$

Briefly explain the tax implications of the proposed plan to pay a dividend in $2023(5$ marks$).$

EXHIBIT $2-1$

BEANS AND GREENS LTD$.$

$2023$ Financial Information

Beans and Greens Ltd$.$s income for accounting purposes for $2023$ is summarized as follows:

Income from operations $ $350,000*$

Gain on sale of assets $10,000$

Dividend income from Wind Farm Public Ltd$.5,000$

Interest on bond $1,000$

Share of profit of Alpine Inc. $90,000$

$ $456,000$

$*$$$100,000$ relates to manufacturing and processing activities at the offsite location.

BGL owns $45\%$ of the shares of Alpine Inc., a CCPC operating an active business. During $2023,$ BGL received a $$9,000$ dividend from Alpine and credited this amount to the balance sheet account $$Investment in share of Alpine Inc.$$ BGL uses the equity method of accounting for this investment.

For the year ended December $31,2023,$ Alpine earned net income of $$200,000$ and claimed the small business deduction on this amount. Its RDTOH balance was $$4,000.$

On July $1,2023,$ the company spent $$20,000$ on the purchase of cutlery, dishes, and glasses $($each item cost less than $$500)$ for the coffee house and bakery. At the same time, the company sold the old kitchen utensils for $$3,000.$ These transactions were all capitalized for financial statement purposes.

During $2023,$ a goodwill impairment test was done on existing assets and as a result $$5,000$ was written down from accounting income.

Beans and Greens Ltd$.,$ purchased the following assets on June $5,2023$:

Automobile for $$35,000$

Passenger vehicle for $$29,000$

New desktop computers for $$20,000($includes $$5,000$ for computer application software$)$

Beans and Greens Ltd$.$ sold the following assets in July $2023$:

Automobile for $$23,000($acquired in June $2021$ for $$35,000)$

Notebook and desktop computers for $$4,000($acquired in March $2021$ for $$15,000)$

Beans and Greens Ltd$.,$ borrowed money from a financial institution for the purchase of a passenger vehicle $($note $4)$ and paid $$2,800$ in interest $($$$400$ per month for $7$ months$).$

Beans and Greens Ltd$.,$ sold a franchise for $$150,000$ that was acquired in January $2021$ for $$110,000.$

Katherine$$s spouse worked in the company during $2023$ as an advertising and promotions coordinator. He was given a bonus of $$12,000$ arbitrarily. This bonus was not given to any other employee.

The company spent $$25,000$ to build a parking lot. Due to an accounting error, this amount was charged to the income statement and placed in CCA Class $17$ for tax purposes.

A review of Beans and Greens Ltd$.$s $2022$ corporate tax return provides the following information:

Capital dividend account $ $10,000$

Non$-$capital loss NIL

Non$-$eligible RDTOH