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Calculate the dividend refund

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Question - Mr. Stevens owns 100% of the shares of Stevens Holdings Inc. (SHI) which owns 100% of Fancy Operating Ltd. (FOL). Both SHI and FOL have a December 31 year-end.

The following information pertains to the December 31, 2016 year-ends:

(Neither company paid any dividends in 2015).

Stevens Holdings Inc.

  • balance in refundable dividend tax on hand account at December 31, 2015 was $8,000
  • received taxable dividend from FOL of $75,000
  • received taxable dividend from Canadian Pacific Ltd. of $8,000 on October 31, 2016
  • earned interest income of $12,000
  • realized a capital gain of $42,000
  • paid a capital dividend of $10,500 and a taxable dividend of $50,000 to Mr. Stevens on February 15, 2016

Fancy Operating Ltd.

  • balance in refundable dividend tax on hand account at December 31, 2015 was $2,000
  • earned active business income of $80,000 and interest income of $7,000
  • paid taxable dividends to SHI of $75,000 on July 15, 2016

Required:

(i) Calculate the dividend refund for FOL for 2016.

(ii) Calculate the Part IV tax for SHI for 2016.

(iii) Calculate the dividend refund for SHI for 2016.

Reference no: EM131594951

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