A Junior accountant named Sam needs your help. He has asked you to double check his...

 

   

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A Junior accountant named Sam needs your help. He has asked you to double check his work on the company to date and to complete the work as described as the following: ABC Ltd. is a Canadian-controlled private corporation located in Windsor, Ontario, whose fiscal year end is December 31. The company's income for tax purposes for 2021 was calculated as follows: Distribution Income Retailing income.. Maintenance service contract loss. Patent incomeNote 1.. Rental income - Note 2.. Taxable capital gains net of losses - Note 3. Recapture of CCA - Note 4. Interest income on outstanding account receivable on retailing income Interest income from a sinking fund trust for replacement of a building..... Foreign business income (gross amount - $Cdn) - Note 4. Foreign non-business income (gross amount $Cdn) - Note 4 Dividends from taxable Canadian Corporations -see d part Profit on sale of excess land -Note 5. Net income for tax purposes-Division B $225,000 125,000 (10,000) 50,000 26,000 45,000 48,000 7,000 11,000 26,000 12,000 73,000 80.000 $718,000 NOTES: (1) The patent income was from an associated CCPC company which had $600,000 in active business income. (2) The rental income was derived from leasing the entire space on a five- year lease in an unused warehouse to an arm length party. (3) The net taxable capital gain and the recapture concerned the disposition of certain specialized maintenance service equipment. (4) Withholding tax on the non-business income was $3,100 (Cdn). Foreign income tax in the amount of $2,600 (Cdn) was paid on the foreign business income. (s) The land had been held for approximately 20 years. It was sold as a result of an unsolicited offer and the fact that the company change its plans on building an extension on its warehouse. Additional Information: (a) ABC made the following selected payments during the year: Charitable donations ... (b) The balances in the tax accounts on January 1, 2021 were: Unused charitable donations from 2015.. Unused business foreign tax credit. Non capital losses.... Net capital losses (arising in 2017). (e) Taxable income earned in Ontario which is the only Canadian jurisdiction in which ABC operates is approximately 89% of the total (d) Summary of taxable dividends received from taxable Canadian corporations: Date received Aug. 1, 2021 Oct. 1, 2021 **** ***** Payer A Ltd. B Ltd. % of voting shares owned 6% 62% Amount of eligible Dividend refund dividend received by received payer corp. $23,000 $7,000 50,000 21,000 $73,000 (4) Summary of dividends paid by ABC Ltd.: Type of dividend Amount Taxable dividend ..non-eligible...... $95,000 Tax-free ssec. 83(2) dividend. Eligible. 50,000 Taxable dividend... eligible...... 44,000 Date declared July 15, 2021 $ 18,000 Oct. 15, 2021 Dec. 15,2021 $ 3,000 4,100 39,000 82,000 Date paid Aug. 15, 2021 Nov. 15,2021 Jan. 15, 2022 (e) The non-eligible refundable dividend tax on hand balance at December 31, 2020 was $15,000. The dividend refund for 2020 was $4,000 - REQUIRED (A) Compute the federal Part I tax and assumed provincial tax at a 11% rate on federal taxable income payable by the company for 2021. Show in detail the calculation of all deductions in the computation, using a separate schedule for each special deduction. (B) Compute the refundable dividend tax on hand balance as at December 31, 2021, showing, in detail, your calculations and compute the dividend refund for 2021 A Junior accountant named Sam needs your help. He has asked you to double check his work on the company to date and to complete the work as described as the following: ABC Ltd. is a Canadian-controlled private corporation located in Windsor, Ontario, whose fiscal year end is December 31. The company's income for tax purposes for 2021 was calculated as follows: Distribution Income Retailing income.. Maintenance service contract loss. Patent incomeNote 1.. Rental income - Note 2.. Taxable capital gains net of losses - Note 3. Recapture of CCA - Note 4. Interest income on outstanding account receivable on retailing income Interest income from a sinking fund trust for replacement of a building..... Foreign business income (gross amount - $Cdn) - Note 4. Foreign non-business income (gross amount $Cdn) - Note 4 Dividends from taxable Canadian Corporations -see d part Profit on sale of excess land -Note 5. Net income for tax purposes-Division B $225,000 125,000 (10,000) 50,000 26,000 45,000 48,000 7,000 11,000 26,000 12,000 73,000 80.000 $718,000 NOTES: (1) The patent income was from an associated CCPC company which had $600,000 in active business income. (2) The rental income was derived from leasing the entire space on a five- year lease in an unused warehouse to an arm length party. (3) The net taxable capital gain and the recapture concerned the disposition of certain specialized maintenance service equipment. (4) Withholding tax on the non-business income was $3,100 (Cdn). Foreign income tax in the amount of $2,600 (Cdn) was paid on the foreign business income. (s) The land had been held for approximately 20 years. It was sold as a result of an unsolicited offer and the fact that the company change its plans on building an extension on its warehouse. Additional Information: (a) ABC made the following selected payments during the year: Charitable donations ... (b) The balances in the tax accounts on January 1, 2021 were: Unused charitable donations from 2015.. Unused business foreign tax credit. Non capital losses.... Net capital losses (arising in 2017). (e) Taxable income earned in Ontario which is the only Canadian jurisdiction in which ABC operates is approximately 89% of the total (d) Summary of taxable dividends received from taxable Canadian corporations: Date received Aug. 1, 2021 Oct. 1, 2021 **** ***** Payer A Ltd. B Ltd. % of voting shares owned 6% 62% Amount of eligible Dividend refund dividend received by received payer corp. $23,000 $7,000 50,000 21,000 $73,000 (4) Summary of dividends paid by ABC Ltd.: Type of dividend Amount Taxable dividend ..non-eligible...... $95,000 Tax-free ssec. 83(2) dividend. Eligible. 50,000 Taxable dividend... eligible...... 44,000 Date declared July 15, 2021 $ 18,000 Oct. 15, 2021 Dec. 15,2021 $ 3,000 4,100 39,000 82,000 Date paid Aug. 15, 2021 Nov. 15,2021 Jan. 15, 2022 (e) The non-eligible refundable dividend tax on hand balance at December 31, 2020 was $15,000. The dividend refund for 2020 was $4,000 - REQUIRED (A) Compute the federal Part I tax and assumed provincial tax at a 11% rate on federal taxable income payable by the company for 2021. Show in detail the calculation of all deductions in the computation, using a separate schedule for each special deduction. (B) Compute the refundable dividend tax on hand balance as at December 31, 2021, showing, in detail, your calculations and compute the dividend refund for 2021

Answer rating: 100% (QA)

A Computing Federal Part I Tax and Assumed Provincial Tax at 11 Rate on Federal Taxable Income Payable by the Company for 2021 The calculation of the federal Part I tax and assumed provincial tax at 1... View the full answer