Venus Williams Inc. (VWI) is a Canadian controlled private corporation (CCPC) with a December 31 year end.
Question:
Venus Williams Inc. (VWI) is a Canadian controlled private corporation (CCPC) with a December 31 year end. For the taxation year ending December 31, 2020, its Net income for Tax Purposes was made up of the following components:
ACTIVE BUSINESS INCOME | $ 602 200 |
DIVIDENDS FROM CANADIAN CORPORATIONS : | |
Serena Inc. (Subsidiary – 75%) (Note 1) | 255 000 |
Portfolio Investment (eligible dividends) | 100 000 |
INTEREST | 64 300 |
TAXABLE CAPITAL GAINS | 132 600 |
NET INCOME FOR TAX PURPOSES | $ 1 154 100 |
Note 1 As a result of paying these dividends, Serena Inc. received a dividend refund of $ 78 000.
Additional information:
1. VWI is allowed an ABL of $ 100 000 because the Corporation shares the ABL with other associated companies.
2. At December 31, 2019, VWI had a RDTOH balance of $ 18 000. No dividends were paid in 2019 by VWI.
3. On July 1, 2020, VWI paid taxable dividends to its shareholders in the amount of $ 148 700. Of this total, $ 42 600 were designated as eligible.
4. VWI has a net capital loss carry forward available of $ 35 000 and a non-capital loss carry forward of $ 163 400. It plans to deduct the maximum of both of these items during 2020.
Required: Calculate the following items for VWI:
A) Federal Part I Tax Payable
B) Part IV Tax Payable
C) The balance in the RDTOH account on December 31, 2020
D) The Dividend Refund
E) Total Federal Tax Payable
N.B.: When performing your calculation, assume that the small business deduction rate prevailing in 2020 is 19%.
Canadian Income Taxation planning and decision making
ISBN: 9781259094330
17th edition 2014-2015 version
Authors: Joan Kitunen, William Buckwold