Dell Incorporated is a Canadian-controlled private corporation located in Toronto, Ontario. For its fiscal year ended December 31, 2020, the corporation had calculated its income for tax purposes under Division B as follows:
Canadian source:
Interest on Loan to 25% own subsidy, Note 1………………………………. $22,000

Retail income ................................................................................................ $277,000
Dividend from subsidy Note 6 ……………. ……………………………………... 13,000
Advertising agency loss ........................................................................ (10,000)
Rental income from warehouse fully rented on a five-year lease .....................24,000
Consulting income ....................................................................................170,000
Interest on outstanding accounts receivable in retailing business .....................5,000
Patent Income…Note 3…………………………………………………………15,000
Recapture of CCA from sale of fixtures used in retailing business .......40,000
Interest income from five-year bonds ...................................................................20,000
Foreign non business income…Note 5….……………………………………….25,000
Sale of Land Note 2………………………………………………………………16,000
Foreign Business Income…Note 4 …………………………………………………..20,000

Taxable capital gain .................(active assets)……............................................... 10,000
Dividends from non-connected taxable Canadian corporations .eligible........ 6,000

Division B net income for tax purposes ................................................. $653,000

Note 1-The subsidy company is using the funds to purchase active working capital for production purposes Note 2- The land sale (vacant land) was a result of an unexpected offer as a result of the company
abandoning its plans to build a new warehouse. The land had been held for 10 years. The ACB of the land was $21,000 and proceeds received were $47,000. Assume the treatment is a
non-active asset.
Note 3- The patent has been determined to property income
Note 4- The above foreign business income used is net of $7,200 tax withheld
Note 5- The above foreign non business income is the gross figure before $7,000 tax withheld
Note 6- The subsidy received a dividend refund of $2,000 and is non-eligible. This is Dell only subsidiary.

Dell Inc. made the following selected payments during the year:
Charitable donation................................................................17,000
Taxable dividends non-eligible....................................... 70,000
The balances in the tax accounts on December 31, 2019 were:
Charitable donations from 2013 ....................................................................$ 6,000
Non-capital losses from 2014 ....................................................................... 21,000
Net capital losses from 1999 ...................................................................... 6,000
Refundable dividend tax on hand ................................................ 40,000
Dividend refund for 2019 ..................................................................17,000

Dell Inc. allocated $40,000 of its business limit to other associated corporations.
Taxable income earned in Ontario, which is the Canadian jurisdiction in which Dell Inc. operates, is approximately 90% of the total

The company has hired you as an accountant and has asked you to review the above calculations and information given, for any errors and to:

(A) ) Compute the federal Part I tax and provincial tax at a 14% rate on federal taxable income for the 2020 taxation year. Show in detail the calculation of all deductions in the computation, using a separate schedule for each special deduction. In calculating the small business deduction list all ineligible items of income, if any, and indicate the amount of the business limit available for the subsidiary.
(B) ) Compute the dividend refund for 2020 and the amount of any RDTOH to be carried forward.

Answer rating: 100% (QA)

A Compute the federal Part I tax and provincial tax at a 14 rate on federal taxable income for the 2... View the full answer