NestEgg Inc. is a Canadian controlled private corporation. It is associated with two other CCPCs and...

  

 

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NestEgg Inc. is a Canadian controlled private corporation. It is associated with two other CCPCs and has agreed that its share of the annual business limit for 2022 will be $245,000. NestEgg's fiscal year end is December 31. The following is the company's condensed Income Statement for the year ended December 31, 2022: Operating revenues Operating expenses Operating income Other income: Non-eligible dividends from 40% associate (NOTE) 54,175 Interest on overdue accounts receivable 2,400 Eligible dividends from Canadian public corps. Canadian source bond interest Gain on sale of building Loss on sale of Class 10 asset Accounting income before taxes 6,000 4,300 87,500 (7,100) $634,000 (390,000) $244,000 147,275 $391,275 NOTE: The associated company received a dividend refund of $20,000 as a result of paying non- eligible dividends to its shareholders. Information about operating income is as follows: Depreciation & CCA: Operating expenses included $48,000 of depreciation expense. The following are the UCC balances for each class of assets at January 1, 2022: Class 1 Building (non-residential office building) Class 8 Other assets Class 10 Vehicles $620,000 78,600 120,000 During 2022, there were $20,500 of additions to Class 8. The additions qualify for the accelerated investment incentive. Also, Class 10 assets with a cost of $45,000 were sold for $32,000. The net book value of these assets was $39,100. New Class 10 assets, which qualify for the accelerated investment incentive, were purchased for $55,000. During the year, the company decided to lease office space and sold its Class 1 building for 800,000. The capital cost of the building was $750,000 and the net book value was $712,500. The land that the building was situated on was also sold for $300,000, an amount equal to its capital cost. Interest and penalties The company's operating expenses included $675 of interest and penalties resulting from late payment and filing of the company's tax return. Charitable Donations: NestEgg made $7,500 in charitable donations that were deducted as operating expenses. Meals & Entertainment: The company's operating expenses included $16,000 of meals and entertainment expenses. $4,000 of the $16,000 was spent on the company's annual holiday party for all staff. Club Dues: The company's operating expenses included a $3,600 corporate membership fee to the local curling club. Warranty costs: The company's operating expenses included warranty expense of $15,000. The company incurred $17,500 servicing products returned under warranty. Other Information: 80% of NestEgg's taxable income can be allocated to a province. NestEgg had active business income of equal to its net business income for tax purposes for 2022. (This would be the amount without considering the items (and related adjustments) in "other income" when calculating the Net Income for Tax Purposes.) The December 31, 2021 balance in NestEgg's non-eligible refundable dividend tax on hand (NERDTOH) account was $62,000. The dividend refund for the year ending December 31, 2021 was $16,100 and was received in 2022. At the end of 2021, NestEgg had a nil balance in its GRIP and a nil balance in its eligible refundable dividend tax on hand (ERDTOH) account. None of the $42,000 of dividends paid in 2021 was designated as eligible. At the beginning of 2022, NestEgg has a net capital loss carry forward of $15,500 and a non- capital loss carry forward of $8,800. NestEgg intends to deduct the maximum amount of any carry forwards against its 2022 income. For 2021, the Adjusted Aggregate Investment Income of NestEgg and its associated companies is $45,000 and their Taxable Capital Employed in Canada was $5,568,000. NestEgg paid $90,000 in taxable dividends during 2022. $70,000 of these dividends were designated as eligible. Question: Calculate the Net Income for Tax Purposes and Taxable Income for the year ended December 31, 2022. (Show the calculation of CCA by class including the ending UCC for each class.) NestEgg Inc. is a Canadian controlled private corporation. It is associated with two other CCPCs and has agreed that its share of the annual business limit for 2022 will be $245,000. NestEgg's fiscal year end is December 31. The following is the company's condensed Income Statement for the year ended December 31, 2022: Operating revenues Operating expenses Operating income Other income: Non-eligible dividends from 40% associate (NOTE) 54,175 Interest on overdue accounts receivable 2,400 Eligible dividends from Canadian public corps. Canadian source bond interest Gain on sale of building Loss on sale of Class 10 asset Accounting income before taxes 6,000 4,300 87,500 (7,100) $634,000 (390,000) $244,000 147,275 $391,275 NOTE: The associated company received a dividend refund of $20,000 as a result of paying non- eligible dividends to its shareholders. Information about operating income is as follows: Depreciation & CCA: Operating expenses included $48,000 of depreciation expense. The following are the UCC balances for each class of assets at January 1, 2022: Class 1 Building (non-residential office building) Class 8 Other assets Class 10 Vehicles $620,000 78,600 120,000 During 2022, there were $20,500 of additions to Class 8. The additions qualify for the accelerated investment incentive. Also, Class 10 assets with a cost of $45,000 were sold for $32,000. The net book value of these assets was $39,100. New Class 10 assets, which qualify for the accelerated investment incentive, were purchased for $55,000. During the year, the company decided to lease office space and sold its Class 1 building for 800,000. The capital cost of the building was $750,000 and the net book value was $712,500. The land that the building was situated on was also sold for $300,000, an amount equal to its capital cost. Interest and penalties The company's operating expenses included $675 of interest and penalties resulting from late payment and filing of the company's tax return. Charitable Donations: NestEgg made $7,500 in charitable donations that were deducted as operating expenses. Meals & Entertainment: The company's operating expenses included $16,000 of meals and entertainment expenses. $4,000 of the $16,000 was spent on the company's annual holiday party for all staff. Club Dues: The company's operating expenses included a $3,600 corporate membership fee to the local curling club. Warranty costs: The company's operating expenses included warranty expense of $15,000. The company incurred $17,500 servicing products returned under warranty. Other Information: 80% of NestEgg's taxable income can be allocated to a province. NestEgg had active business income of equal to its net business income for tax purposes for 2022. (This would be the amount without considering the items (and related adjustments) in "other income" when calculating the Net Income for Tax Purposes.) The December 31, 2021 balance in NestEgg's non-eligible refundable dividend tax on hand (NERDTOH) account was $62,000. The dividend refund for the year ending December 31, 2021 was $16,100 and was received in 2022. At the end of 2021, NestEgg had a nil balance in its GRIP and a nil balance in its eligible refundable dividend tax on hand (ERDTOH) account. None of the $42,000 of dividends paid in 2021 was designated as eligible. At the beginning of 2022, NestEgg has a net capital loss carry forward of $15,500 and a non- capital loss carry forward of $8,800. NestEgg intends to deduct the maximum amount of any carry forwards against its 2022 income. For 2021, the Adjusted Aggregate Investment Income of NestEgg and its associated companies is $45,000 and their Taxable Capital Employed in Canada was $5,568,000. NestEgg paid $90,000 in taxable dividends during 2022. $70,000 of these dividends were designated as eligible. Question: Calculate the Net Income for Tax Purposes and Taxable Income for the year ended December 31, 2022. (Show the calculation of CCA by class including the ending UCC for each class.)

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Here are the calculations for NestEggs various tax items for 2022 1 Business income limit NestEggs agreed business income limit is 245000 2 Active bus... View the full answer