Mike, a small business owner, has accumulated cash inside his corporation that is made up of excess
Question:
Mike, a small business owner, has accumulated cash inside his corporation that is made up of excess profits, net proceeds from a real estate property sold last tax year, as well as residual proceeds from a life insurance claim that was used to redeem his previous business partner's shares in his CCPC.
He is a proponent of compound investing, and chooses to automatically reinvest all investment income into the same securities that produced that income in the first place in order to build up a base that he can one day retire on. Appropriately, he has decided to direct his accumulated cash into a portfolio of low risk, fixed income funds.
Mike's business has always generated $435258 of taxable, active business income, where his Small Business Deduction ("SBD") limit is $500,000. If his investment portfolio generates $98702 of income that is automatically reinvested to purchase more securities, how much SBD access will his corporation have for the upcoming tax year?
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw