Oland Ltd. is a CCPC with a December 31 year end. For the year ending December...

 

  
 

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Oland Ltd. is a CCPC with a December 31 year end. For the year ending December 31, 2021, the income statement of the company, prepared in accordance with generally accepted accounting principles (ASPE), is as follows: Revenues Expenses: Cost of goods sold Selling and administrative costs Amortization expense Charitable donations Operating income Gain on sale of property Loss on sale of vehicles Gain on sale of investments Dividends received (see Note) Net income before taxes ($ 776,257) (394,672) (125,489) ( 27,000) $ 153,600 (55,000) 11,000 123,400 Note The components of the dividends received are as follows: Eligible dividends from Canadian public companies Non-eligible dividends from 80% owned subsidiary (the subsidiary received a dividend refund of $15,000 from its non-eligible RDTOH) Non-eligible dividends from wholly owned subsidiary (no dividend refund) Total dividends received $1,625,986 (1,323,418) $ 302,568 233,000 $ 535,568 $ 62,300 48,000 13,100 $123,400 Oland is associated with both of the subsidiaries. The two subsidiaries have each been allocated $125,000 of the small business deduction's business limit. The remaining $250,000 has been allocated to Oland. Other Information: 1. Selling and administrative costs include $22,490 in business meals and entertainment. 2. Selling and administrative costs includes interest on late income tax instalments of $1,240 and on late municipal tax payments of $625. 3. Selling and administrative costs includes bond discount amortization of $3,850. 4. During 2021, Oland Ltd. acquired a competing business at a price that included goodwill of $110,400. For accounting purposes, there is no impairment or write-down of the goodwill in 2021. 5. Selling and administrative costs include membership fees for several employees in a local golf and country club. These fees total $7,285. 6. As the company expects to issue more shares during 2021, it made a number of amend- ments to its articles of incorporation and included the legal costs in selling and administra- tive costs. These costs totalled $11,482. 7. On January 1, 2021, the company had the following UCC balances: Class 1 Class 8 Class 10 Class 13 Class 14.1 $582,652 575,267 75,348 88,600 Nil The class 1 balance relates to a single real property acquired in 2001 at a cost of $750,000. It is estimated that the value of the land at this time was $50,000. On February 1, 2021, this property is sold for $850,000. It is estimated that, at this time, the value of the land has increased to $80,000. In the accounting records, the carrying value of this real property was $696,400, $646,400 for the building and $50,000 for the land. K The old building is replaced on February 15, 2021, with a new building acquired at a cost of $923,000, of which $86,000 is allocated to the land. As the building is used more than 90% for non-residential purposes, it qualifies for the special 6% CCA rate. The appropriate election is made with the CRA to include this property in a separate class. No elections are made with respect to the replacement of the building. During 2021, class 8 properties were acquired at a cost of $226,000. Class 8 properties with a capital cost of $185,000 were sold for $210,000. The class 8 properties were paintings by Canadian artists, and each was sold for an amount in excess of its capital cost. The accoun- tant had not amortized them for accounting purposes. Class 8 contains a large number of properties at the end of 2021. As the company has decided to lease all of its vehicles in the future, all of the class 10 properties are sold during the year. The total capital cost of these properties was $142,000 and the proceeds of disposition amounted to $43,000. The carrying value for accounting purposes was $98,000. The class 13 balance relates to a single lease that commenced on January 1, 2016. The lease has an initial term of seven years, with two successive options to renew for three years each. At the inception of the lease, the company spent $110,000 on leasehold improve- ments. On January 1, 2018, an additional $44,800 was spent on further improvements. 8. It is Oland's policy to deduct maximum amounts of CCA. 9. During 2021, Oland spends $18,500 landscaping the grounds of its new building. For accounting purposes this was treated as an asset. However, the company will not amortize this balance because it believes the work has an unlimited life. 10. Investments were sold during the year for $126,000. The adjusted cost base of these invest- ments and carrying value for accounting purposes was $115,000. 11. On January 1, 2022, Oland had the following balances: Eligible RDTOH Non-eligible RDTOH $ 39,660 Nil $162,345 GRIP During 2020, Oland designated $12,350 of its dividends as eligible. 12. During 2021, Oland paid $42,300 in dividends. Of this total, $26,300 were designated as eligible. 13. At the beginning of 2021, Oland had a $23,000 net capital loss balance from 2018. It also had a 2018 non-capital loss balance of $36,400. The company would like to deduct as much as possible of these two carry overs during 2021. 14. All of Oland's taxable income is considered to have been earned in a province in the year. 15. It has been determined that Oland has $300,289 of active business income. Of this total, $43,000 results from manufacturing and processing activity. Because of special rates in the province in which it operates, Oland makes a separate calculation of the M&P deduction. 16. For 2020, Oland and its associated companies had combined adjusted aggregate investment income of $48,900 and taxable capital employed in Canada of $8,900,000. Required: Show all of the calculations used to provide the following required information, including those for which the result is nil. A. Determine Oland's minimum net income for tax purposes and taxable income for the year ending December 31, 2021. Include in your solution the January 1, 2022, UCC balance for each CCA class. B. Determine Oland's Part I tax payable for the year ending December 31, 2021. C. Determine the refundable portion of Oland's Part I tax payable for 2021. D. Determine Oland's Part IV tax payable for the 2021. E. Determine the December 31, 2021, balance in Oland's GRIP. F Determine the December 31, 2021, balances in Oland's eligible RDTOH and non-eligible RDTOH. G. Determine Oland's dividend refund for 2021, separately identifying the refund related to eligible dividends and the refund related to non-eligible dividends. H. Determine Oland's net federal tax payable for 2021. Oland Ltd. is a CCPC with a December 31 year end. For the year ending December 31, 2021, the income statement of the company, prepared in accordance with generally accepted accounting principles (ASPE), is as follows: Revenues Expenses: Cost of goods sold Selling and administrative costs Amortization expense Charitable donations Operating income Gain on sale of property Loss on sale of vehicles Gain on sale of investments Dividends received (see Note) Net income before taxes ($ 776,257) (394,672) (125,489) ( 27,000) $ 153,600 (55,000) 11,000 123,400 Note The components of the dividends received are as follows: Eligible dividends from Canadian public companies Non-eligible dividends from 80% owned subsidiary (the subsidiary received a dividend refund of $15,000 from its non-eligible RDTOH) Non-eligible dividends from wholly owned subsidiary (no dividend refund) Total dividends received $1,625,986 (1,323,418) $ 302,568 233,000 $ 535,568 $ 62,300 48,000 13,100 $123,400 Oland is associated with both of the subsidiaries. The two subsidiaries have each been allocated $125,000 of the small business deduction's business limit. The remaining $250,000 has been allocated to Oland. Other Information: 1. Selling and administrative costs include $22,490 in business meals and entertainment. 2. Selling and administrative costs includes interest on late income tax instalments of $1,240 and on late municipal tax payments of $625. 3. Selling and administrative costs includes bond discount amortization of $3,850. 4. During 2021, Oland Ltd. acquired a competing business at a price that included goodwill of $110,400. For accounting purposes, there is no impairment or write-down of the goodwill in 2021. 5. Selling and administrative costs include membership fees for several employees in a local golf and country club. These fees total $7,285. 6. As the company expects to issue more shares during 2021, it made a number of amend- ments to its articles of incorporation and included the legal costs in selling and administra- tive costs. These costs totalled $11,482. 7. On January 1, 2021, the company had the following UCC balances: Class 1 Class 8 Class 10 Class 13 Class 14.1 $582,652 575,267 75,348 88,600 Nil The class 1 balance relates to a single real property acquired in 2001 at a cost of $750,000. It is estimated that the value of the land at this time was $50,000. On February 1, 2021, this property is sold for $850,000. It is estimated that, at this time, the value of the land has increased to $80,000. In the accounting records, the carrying value of this real property was $696,400, $646,400 for the building and $50,000 for the land. K The old building is replaced on February 15, 2021, with a new building acquired at a cost of $923,000, of which $86,000 is allocated to the land. As the building is used more than 90% for non-residential purposes, it qualifies for the special 6% CCA rate. The appropriate election is made with the CRA to include this property in a separate class. No elections are made with respect to the replacement of the building. During 2021, class 8 properties were acquired at a cost of $226,000. Class 8 properties with a capital cost of $185,000 were sold for $210,000. The class 8 properties were paintings by Canadian artists, and each was sold for an amount in excess of its capital cost. The accoun- tant had not amortized them for accounting purposes. Class 8 contains a large number of properties at the end of 2021. As the company has decided to lease all of its vehicles in the future, all of the class 10 properties are sold during the year. The total capital cost of these properties was $142,000 and the proceeds of disposition amounted to $43,000. The carrying value for accounting purposes was $98,000. The class 13 balance relates to a single lease that commenced on January 1, 2016. The lease has an initial term of seven years, with two successive options to renew for three years each. At the inception of the lease, the company spent $110,000 on leasehold improve- ments. On January 1, 2018, an additional $44,800 was spent on further improvements. 8. It is Oland's policy to deduct maximum amounts of CCA. 9. During 2021, Oland spends $18,500 landscaping the grounds of its new building. For accounting purposes this was treated as an asset. However, the company will not amortize this balance because it believes the work has an unlimited life. 10. Investments were sold during the year for $126,000. The adjusted cost base of these invest- ments and carrying value for accounting purposes was $115,000. 11. On January 1, 2022, Oland had the following balances: Eligible RDTOH Non-eligible RDTOH $ 39,660 Nil $162,345 GRIP During 2020, Oland designated $12,350 of its dividends as eligible. 12. During 2021, Oland paid $42,300 in dividends. Of this total, $26,300 were designated as eligible. 13. At the beginning of 2021, Oland had a $23,000 net capital loss balance from 2018. It also had a 2018 non-capital loss balance of $36,400. The company would like to deduct as much as possible of these two carry overs during 2021. 14. All of Oland's taxable income is considered to have been earned in a province in the year. 15. It has been determined that Oland has $300,289 of active business income. Of this total, $43,000 results from manufacturing and processing activity. Because of special rates in the province in which it operates, Oland makes a separate calculation of the M&P deduction. 16. For 2020, Oland and its associated companies had combined adjusted aggregate investment income of $48,900 and taxable capital employed in Canada of $8,900,000. Required: Show all of the calculations used to provide the following required information, including those for which the result is nil. A. Determine Oland's minimum net income for tax purposes and taxable income for the year ending December 31, 2021. Include in your solution the January 1, 2022, UCC balance for each CCA class. B. Determine Oland's Part I tax payable for the year ending December 31, 2021. C. Determine the refundable portion of Oland's Part I tax payable for 2021. D. Determine Oland's Part IV tax payable for the 2021. E. Determine the December 31, 2021, balance in Oland's GRIP. F Determine the December 31, 2021, balances in Oland's eligible RDTOH and non-eligible RDTOH. G. Determine Oland's dividend refund for 2021, separately identifying the refund related to eligible dividends and the refund related to non-eligible dividends. H. Determine Oland's net federal tax payable for 2021.

Answer rating: 100% (QA)

Certainly Here are the stepbystep calculations for each component A Determining Olands minimum net income for tax purposes and taxable income 1 Start ... View the full answer