QuestionQuestion 1 (1 point)Net income for tax purposes for Dickson Inc. has been correctly determined as $200,050. Additional information is as follows:During the year, Dickson sold all of its shares in Cola Ltd. for proceeds of $16,000. The cost of the shares was $13,200.Charitable donations made to the Canadian Red Cross totalled $700.The company has a capital loss carryforward of $1,500 from the previous year when it sold shares in Enerwise costing $11,500 for $10,000.What is Dickson’s taxable income for the year?Question 1 options:a)$199,300b)$197,850c)$198,600d)$197,950Question 2 (1 point)Evergreen Co. has computed its net income for tax purposes for Year 7 as follows:Business income $200,000Dividends from taxable Canadian corporations 30,000Dividends from foreign corporations (1)15,000Taxable capital gains 10,000Net income for tax purposes $255,000(1) The foreign corporations are not foreign affiliates.Evergreen made charitable donations of $5,000 to registered charities in the year. In addition, the company has the following carryover balances at the beginning of the year:Net allowable capital loss (Year 3) $12,000Non-capital loss (Year 4) 13,000Charitable donations (Year 6) 2,000What is Evergreen’s taxable income?Question 2 options:a)$180,000b)$178,000c)$195,000d)$197,000Question 3 (1 point)Investco Inc. has the following information for its year ended December 31 of the current year:Taxable capital gains realized in the year $27,000Dividends from taxable Canadian corporations 96,000Canadian-source interest income 54,400Business loss (546,000)The company has a net allowable capital loss of $38,000 from two years ago available for carryforward and would like to deduct this loss to the extent possible in the current year. What is the non-capital loss carryover balance at the end of the current year?Question 3 options:a)$395,600b)$502,600c)$491,600d)$464,600Question 4 (1 point)For the current year, Aco Ltd. reported accounting income of $325,000 net of tax expense of $26,000. Aco’s capital cost allowance (CCA) claim for the year is equal to amortization expense reported in the income statement. Aco received dividends from a non-connected Canadian corporation of $32,000. It also reported an accounting gain of $65,000 on the sale of marketable securities, which resulted in a capital gain of $50,000. What is Aco’s net income for tax purposes for the year?Question 4 options:a)$343,000b)$336,000c)$285,000d)$311,000Question 5 (1 point)Fargo Ltd. has a December 31 year end. For the current year, the company reported net income before tax for accounting purposes, determined under generally accepted accounting principles, of $532,000. Fargo has an investment in Dardin Inc. that is accounted for using the equity method. Dardin Inc. is a taxable Canadian corporation. Current-period equity income is $35,800, and dividends received on this investment in the year were $23,400. In the current year, Fargo also received dividends from taxable Canadian corporations of $6,800 on portfolio investments and foreign dividends of $4,600 from foreign companies that are not foreign affiliates. Fargo’s capital cost allowance claim for the year is equal to amortization expense reported in the income statement.For the current year, what amount will Fargo report as net income for tax purposes and taxable income?Question 5 options:a)Net income: $519,600; taxable income: $484,800b)Net income: $496,200; taxable income: $489,400c)Net income: $519,600; taxable income: $489,400d)Net income: $555,400; taxable income: $525,200Question 6 (1 point)Lockwood Inc. manufactures and sells various automotive parts. Lockwood’s accounting net income before tax for the year ended December 31, Year 7, is $438,000. The following additional information has been provided for Year 7:The capital cost allowance (CCA) claim is equal to depreciation expense deducted in determining accounting net income.Charitable donations total $21,500.Golf club membership dues for management employees equal $13,450 to generate additional business opportunities.Dividends received equal $15,600 from its Canadian subsidiary company and an additional $6,200 in dividends on portfolio investments in U.S. corporations. Lockwood does not own more than 4% of the shares issued and outstanding of any of the U.S. corporations that paid dividends.Which of the following are the correct amounts for Lockwood’s net income for tax purposes and taxable income for Year 7?Question 6 options:a)Net income for tax purposes of $451,450; taxable income of $435,850b)Net income for tax purposes of $466,225; taxable income of $429,125c)Net income for tax purposes of $472,950; taxable income of $429,650d)Net income for tax purposes of $472,950; taxable income of $435,850Question 7 (1 point)Assume the following for Mike’s Warehouse Ltd. (Mike’s):Net income for tax purposes $530,200Less Net allowable capital losses of other years (5,000)Charitable donations (50,000)Taxable income$475,200During the year, Mike’s realized a taxable capital gain of $20,000 on sale of public company shares. Mike’s did not earn any interest or dividend income during the year.What is the correct amount of net Canadian active business income (ABI) to be used for determining one of the lesser-of amounts for the small business deduction (SBD) for Mike’s for the year?Question 7 options:a)$460,200b)$510,200c)$515,200d)$475,200Question 8 (1 point)The following information has been provided for Parthenon Ltd. (‘Parthenon”) for its current taxation year:Net income for tax purposes $510,200Taxable capital gains realized 25,000Foreign dividends received 8,600Canadian dividends received 10,900Net allowable capital loss carryover used in the year 4,600Non-capital loss carryover used in the year 10,200Foreign business income earned 28,700What is the correct amount of net Canadian active business income (ABI) to be used as one of the lesser-of amounts for determining the small business deduction (SBD) for Parthenon for the year?Question 8 options:a)$465,700b)$452,500c)$426,800d)$437,000Question 9 (1 point)The following information has been provided for Figaro Ltd. for its current taxation year:Taxable capital gains realized 50,000Foreign dividends received (not from foreign affiliate) 17,200Canadian dividends received 21,800Net allowable capital loss carryover used in the year 9,200Non-capital loss carryover used in the year 20,400Foreign business income earned 57,400What amount of investment income will be included in each of Figaro’s net income and taxable income in the year? Investment income included in taxable income is referred to as aggregate investment income (AII).Question 9 options:a)Investment income in net income $71,800; AII $40,800b)Investment income in net income $89,000; AII $58,000c)Investment income in net income $89,000; AII $40,800d)Investment income in net income $89,000; AII $37,600Question 10 (1 point)Dunitall Inc. is a Canadian-controlled private corporation with a December 31 year end. The following amounts have been correctly determined for the current year for Dunitall:Active business income (ABI) $550,000Aggregate investment income (AII) 190,000Taxable income$740,000The combined federal and provincial corporate income tax rate on income eligible for the small business deduction is 15%, while the combined federal and provincial rate on other ABI is 29%. The general rate reduction rate is 13%, and the rate for additional refundable tax is 10 2/3%. Dunitall’s business limit for the year is $500,000.What is the correct amount of income tax payable for Dunitall for the current year?Question 10 options:a)$149,033b)$164,867c)$189,567d)$182,567Question 11 (1 point)Bishop Inc. is a Canadian-controlled private corporation with a December 31 year end. The following amounts have been correctly determined for the current year for Bishop:Active business income$625,000 Aggregate investment income (AII) 95,000 Net income for tax purposes 720,000 Charitable donations (10,500)Taxable income$709,500 Applicable tax rates are as follows: Basic federal rate 38 %Federal abatement 10 %General rate reduction (GRR) 13 %Small business deduction (SBD)19 %Additional refundable tax (ART)10? %Bishop’s business limit is $500,000.What is the correct amount of Federal income tax payable for Bishop for the current year?Question 11 options:a)$78,642b)$86,558c)$169,858d)$98,908Question 12 (1 point)Richard is the sole shareholder of Rango Inc., a Canadian-controlled private corporation (CCPC) that manufactures drum sets. All of its income is active business income (ABI). It was incorporated a number of years ago and has qualified for the small business deduction (SBD) every year since then. Last year, Rango had taxable capital employed in Canada of $11 million, and it was the first year that Rango had taxable capital employed in Canada in excess of $10 million.Which of the following is Rango’s business limit for the purposes of determining the SBD for Rango’s current year-ended December 31?Question 12 options:a)$0b)$100,000c)$400,000d)$500,000Question 13 (1 point)Net income for tax purposes for Pill Inc. for the current year has been correctly calculated as $542,000. Pill is associated with another corporation and as a result, Pill has been allocated 80% of the business limit for the year. Pill received dividends of $50,000 from taxable Canadian corporations (included in net income above) in the year. Pill also earned rental income of $24,000 and realized a taxable capital gain of $10,000 in the year. Pill’s adjusted aggregate investment income (AAII) in the preceding year was less than $50,000.Which of the following is Pill’s net Canadian active business income (ABI) for the year?Question 13 options:a)$458,000b)$482,000c)$508,000d)$542,000Question 14 (1 point)Which of the following statements regarding the small business deduction (SBD) is correct?Question 14 options:a)In order to claim an SBD, a Canadian corporation must have been a Canadian-controlled private corporation (CCPC) at the end of the taxation year.b)If a CCPC has taxable capital employed in Canada greater than $10 million in the current year, its business limit for the current year will be less than $500,000.c)A CCPC must share its business limit with all related and associated corporations.d)Net allowable capital loss carryforwards claimed in the year do not impact the calculation of net Canadian active business income (ABI).Question 15 (1 point)The following information relates to Smith Industries for its current taxation year:Net income for tax purposes $ 631,000Dividends from taxable Canadian corporations (26,000)Net allowable capital loss carryforward (5,000)Taxable income$ 600,000In addition to dividends, net income for tax purposes includes rental income of $22,000 and a net taxable capital gain of $23,000.Smith is not associated with any other corporations and is eligible to claim the full amount of the small business deduction (SBD) in the current year.What amount may Smith claim for the general rate reduction (GRR) in determining its tax payable for the current year?Question 15 options:a)$3,770b)$7,800c)$10,660d)$11,400Question 16 (1 point)The following information has been provided for Maiselle Inc., a Canadian-controlled private corporation, for its current year ended December 31:Net Canadian active business income $ 546,000 Foreign business income 63,000 Charitable donations 3,000 Net income for tax purposes 612,000 Charitable donations (3,000)Taxable income $ 609,000 Based on the determination of revenue and salaries and wages paid in various jurisdictions, 90% of Maiselle’s income is allocated to the provinces. Maiselle is associated with another corporation and has been allocated 80% of the business limit for the year.Applicable tax rates are as follows:Basic federal rate 38 %Federal abatement 10 %General rate reduction (GRR) 13 %Small business deduction (SBD)19 %Additional refundable tax (ART)10? %What is the federal income tax payable for Maiselle for the year?Question 16 options:a)$81,630b)$73,440c)$67,350d)$54,440Question 17 (1 point)The following information has been provided for Eldhar Inc., a Canadian-controlled private corporation, for its current year ended December 31:Net Canadian active business income $ 570,000 Investment income included in net income 38,000Net income 608,000 Charitable donations (13,000) Division C dividend deduction (10,000) Taxable income $ 585,000Eldhar is not associated with any other corporations. Last year its taxable capital was less than $10,000,000 and its adjusted aggregate investment income (AAII) was less than $50,000.Applicable tax rates are as follows:Basic federal rate 38 %Federal abatement 10 %General rate reduction (GRR) 13 %Small business deduction (SBD)19 %Additional refundable tax (ART)10? %What is the federal Part I tax for Eldhar for the year?Question 17 options:a)$64,377b)$58,403c)$66,743d)$60,737Question 18 (1 point)Colter Co., a Canadian-controlled private corporation, is planning to pay dividends in the current year to its two shareholders. Both shareholders are in the highest personal tax bracket. Colter has existing balances in its capital dividend account (CDA) and general rate income pool (GRIP). It has $nil balances in both its non-eligible refundable dividend tax on hand (NERDTOH) and eligible refundable dividend tax on hand (ERDTOH) accounts. To minimize taxes paid by its two shareholders, in what order should Colter designate its dividends?Question 18 options:a)First capital dividends; next non-eligible dividends; lastly eligible dividendsb)First non-eligible dividends; next eligible dividends; lastly capital dividendsc)First capital dividends; next eligible dividends; lastly non-eligible dividendsd)First eligible dividends; next capital dividends; lastly non-eligible dividendsQuestion 19 (1 point)At the beginning of the current year, Malmed Inc., a Canadian-controlled private corporation, had a balance in its capital dividend account (CDA) of $nil. During the year, Malmed realized a capital gain on disposal of a rental property warehouse of $46,000 and realized a capital loss of $6,800 on the sale of marketable securities. In December of the current year, Malmed received a capital dividend of $8,900, and in determining its taxable income Malmed claimed a net allowable capital loss carryforward of $2,400.What is the balance in Malmed’s CDA?Question 19 options:a)$28,500b)$45,700c)$26,100d)$17,200Question 20 (1 point)The following correctly determined amounts for Gershwin Co. for its current taxation year have been provided:Taxable income $ 596,000Aggregate investment income (AII) 36,400Small business deduction (SBD) claimed 85,500Eligible dividends received 5,600Non-eligible dividends received13,500Assuming Gershwin is a Canadian-controlled private corporation, what is the addition to its general rate income pool balance (GRIP) for the year?Question 20 options:a)$84,512b)$78,912c)$92,312d)$110,720Question 21 (1 point)The following information has been provided for Haltech Co., a Canadian-controlled private corporation, for its current taxation year.Opening balance in non-eligible refundable dividendtax on hand (NERDTOH)$ nilInterest received on portfolio investments 24,000Eligible dividends received on portfolio investments $4,500Non-eligible dividend received on Company I shares (1) 3,600Non-eligible dividends received from Company II (2) 20,000(1) Haltech owns 2% of the shares of Company I.(2) Haltech owns 25% of the shares of Company II. The company received a dividend refund of 15% of dividends paid.What is the addition to NERDTOH as a result of these events and transactions?Question 21 options:a)$6,940b)$13,465c)$16,407d)$11,740Question 22 (1 point)During the current year Amlach Inc., a Canadian-controlled private corporation, declared and paid dividends as follows:Eligible dividends $ 46,000Non-eligible dividends 54,000Prior to paying the dividends, Amlach had a $nil balance in its eligible refundable dividend tax on hand (ERDTOH) account and a balance of $34,200 in its non-eligible refundable dividend tax on hand (NERDTOH) account.What is the maximum dividend refund Amlach may claim as a result of paying dividends in the year?Question 22 options:a)$20,700b)$34,200c)$17,633d)$38,333Question 23 (1 point)Jones Co. has a net income for accounting purposes before tax of $415,000 in the current year. The following items were deducted in the calculation of accounting net income before tax:$10,000 of charitable donations and gifts$115,000 of depreciation and amortization$23,500 of warranty expense$18,000 loss on sale of equipmentAs well, capital cost allowance (CCA) for the year has been correctly calculated as $108,500. The equipment, which had originally cost $300,000, was sold for $220,000. Recapture of $11,000 arose as a result of the sale. Jones incurred $12,500 of actual costs related to warranty work on its defective products sold.Which of the following amounts is Jones’s net income for tax purposes for the current year?Question 23 options:a)$431,500b)$449,500c)$471,500d)$461,500Question 24 (1 point)Jian is preparing a corporate tax return for a client, Vista Ltd. Net income before tax per the reviewed financial statements is $42,500. During the course of Jian’s review, Jian notes a number of items that might be tax related:Interest on late payroll remittances$ 120Golf club membership for the president (1)$1,400Reimbursement to sales staff for cost of client lunches$4,500(1) The president uses the club 100% of the time to entertain clients of the company.Also, the company sold all the shares it held in Telcom for $9,000. The shares had an accounting base and an adjusted cost base of $10,000. A loss on sale of shares was included on the income statement. The company did not sell any other capital assets.Capital cost allowance (CCA) equals amortization per the financial statements.What amount should be reported for net income for tax purposes on the T2?Question 24 options:a)$46,770b)$47,150c)$47,270d)$45,870Question 25 (1 point)Which of the following statements regarding dividend refunds is correct?Question 25 options:a)A dividend refund may only be claimed on eligible dividends paid to the extent the company has a balance in its non-eligible refundable dividend tax on hand (NERDTOH) account.b)A dividend refund may be claimed on payment of non-eligible dividends to the extent the company has a balance in its NERDTOH account only, not its ERDTOH account.c)A dividend refund may be claimed on payment of eligible dividends to the extent the company has a balance in either of its NERDTOH or ERDTOH accounts.d)If non-eligible dividends are paid and the company has a balance in both its NERDTOH and ERDTOH accounts, it must first claim a dividend refund out of its NERDTOH account before it can claim a refund out of its ERDTOH account.LawSocial ScienceTax lawACCT 3211Share Question
