Blue Inc. is a Canadian Controlled Private Corporation (CCPC) with a December 31st year end. All the shares of Blue are owned by Canadian individuals. Blue owns 90% of another corporation, Orange.

For the year ended December 31, 2023, Blue has a taxable income of $450,000. This includes a net taxable capital gain of $20,000 from the sale of investments. All other income is Canadian active business income.

During 2023, Orange distributed a $50,000 eligible dividend and received a $10,000 dividend refund.

You have also been provided with the following information from Blue's tax files:

- January 1, 2023, Eligible RDTOH balance = $15,000.

- January 1, 2023, Non eligible RDTOH balance = $5,000.

- The refundable part 1 taxes for the December 31, 2023, taxation year have reliably

been calculated as $6,100.

- January 1, 2023, General Rate Income Pool ("GRIP") balance = $25,000.

- All other tax accounts (loss carry forwards, capital dividend account) have a

beginning balance of nil.

During the 2023 taxation year, Blue distributed a $100,000 dividend to shareholders. Blue did not distribute any dividends in 2022.

Required:

a) Calculate Blue's December 31, 2023, GRIP balance.

b) Calculate Blue's December 31, 2023, RDTOH balances.

c) Blue's shareholders would like the entire dividend to be designated as Eligible.

Do you agree with this designation? Why or why not?

d) How would you suggest Blue designate the dividend if their goal is to minimize

the Company's federal taxes pay

Answer rating: 100% (QA)

a To calculate Blues December 31 2023 GRIP balance we can use the following formula GRIP End of Tax Year GRIP Balance at the end of the previous year ... View the full answer