Rob's Shameless Self-Promotion Sales (RSS-PS) Inc. is a Canadian-controlled private corporation located in London, Ontario. For its fiscal year ended December 31, 2012, the corporation had correctly calculated its income for tax purposes under Division B as follows:
Canadian source:
Consulting income................................................................... $160,000
Advertising agency loss ............................................................. (30,000)
Rental income from warehouse fully rented on a five-year lease ............... 20,000
Retailing income ........................................................................ 75,000
Interest on outstanding accounts receivable in retailing business ................ 25,000
Recapture of CCA from sale of fixtures used in retailing business .............. 25,000
Interest income from five-year bonds ................................................ 75,000
Taxable capital gain .................................................................... 70,000
Dividends from non-connected taxable Canadian corporations .................. 12,000
Foreign sources:
Interest earned on Bermuda bank account (no withholding tax) ................. 20,000
U.S. business income (foreign tax credit of $6,000 equal to foreign tax ..................
paid) ....................................................................................... 23,000
Division B net income for tax purposes ........................................... $475,000
Additional information:
RSS-PS Inc. made the following selected payments during the year:
Scientific research and experimental development (current expenses and
new equipment) ......................................................................... $10000
Charitable donations ........................................................................... 0
Taxable dividends ....................................................................... 14000
............................................................................................. 120000
The balances in the tax accounts on December 31, 2011 were:
Charitable donations from 2009
Non-capital losses from 2008 ......................................................... $1000
Net capital losses from 1999 .......................................................... 56000
Refundable dividend tax on hand ................................................... 18000
Dividend refund for 2011 ............................................................ 20000
............................................................................................. 9000
Taxable income earned in Canada is considered to be 90% of the total earned by RSS-PS Inc. RSS-PS Inc. allocated $370,000 of its $500,000 business limit to other associated corporations. The only scientific research and experimental development expenditures of the associated group were made by RSS-PS Inc.
REQUIRED
(A) Compute the federal Part I tax and provincial tax at a 11.5% rate on federal taxable income for the 2012 taxation year.
(B) Compute the dividend refund for 2012 and the amount of any RDTOH to be carried forward.