Reference no: EM132186835
Taxation Assignment
James Bond Incorporated is a Canadian-controlled private corporation located in Windsor, Ontario. For its fiscal year ended December 31, 2018, the corporation had correctlycalculated its income for tax purposes under Division B as follows:
Canadian source:
Retail income ................................................................................................ $320,000
Advertising agency loss ........................................................................ (60,000)
Rental income from warehouse fully rented on a five-year lease ..................... 70,000
Consulting income .................................................................................... 125,000
Interest on outstanding accounts receivable in retailing business ..................... 15,000
Recapture of CCA from sale of fixtures used in retailing business ....... 65,000
Interest income from five-year bonds ................................................................... 90,000
Foreign non business income............................................................. 200,000
Taxable capital gain ............................................................................................ 35,000
Dividends from non-connected taxable Canadian corporations ....................27,000
Division B net income for tax purposes ................................................. $887,000
Additional information:
James Bond Inc. made the following selected payments during the year:
Charitable donations ................................................................ 155,000
Taxable dividends ............................................................ 160,000
Withholding tax on the non-business income was ......................... 45,000
The balances in the tax accounts on December 31, 2017 were:
Charitable donations from 2015 .................................................................... $ 5,000
Non-capital losses from 2014 ....................................................................... 78,000
Net capital losses from 1999 ...................................................................... 54,000
Refundable dividend tax on hand ................................................ 30,000
Dividend refund for 2017 .................................................................. 17,000
James Bond Inc. allocated $350,000 of its $500,000 business limit to other associated corporations.
Taxable income earned in Ontario, which is the Canadian jurisdiction in which James Bond Inc. operates, is approximately 75% of the total.
James has asked you to:
(A) Compute the federal Part I tax and provincial tax at a 13.5% rate on federal taxable income for the 2018 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 businessdeduction list all ineligible items of income, if any, and indicate the amount of the business limitavailable for the subsidiary.
(B) Compute the dividend refund for 2018 and the amount of any RDTOH to be carried forward.