Ch. 24 - Taxes Payable (Corporate 2)

Question 1

Corporate Taxes - Detailed Approach (CCPC)

Answer 1

1. Basic federal tax
2. (federal abatement)
3. (small business deduction)
4. (MFG and processing profits deductions)
5. (General rate reduction)
6. Additional refundable tax
7. (Foreign tax credit)
8. (Investment tax credits)
9. Equals Federal Part I tax
10. Provincial Tax
11. Part IV Tax
12. (RDTOH recovered)
13. Equals Tax payable before instalments

Question 2

Corporate Taxes - Detailed Approach (Non-CCPC)

Answer 2

1. Basic federal tax
2. (Federal abatement)
3. (MFG and processing profits deduction)
4. (General rate reduction)
5. (Foreign tax credits)
6. (Investment tax credits)
7. Equals Federal Part I Tax
8. Provincial Tax
9. Equals Tax payable before instalments

Question 3

Sources of taxable income

Answer 3

1. Aggregate investment income
2. Active business income
3. foreign business income

Question 4

Aggregate investment income (AII)

Answer 4

1. Interest
2. Net rental income
3. Royalties
4. Dividends
5. Net taxable capital gains
6. Equals AII in net income
7. (Division C deductions)
   i. Net capital loss carryforwards
   ii. Dividends deducted under Div C
   8 Equals AII

Question 5

Active business income

Answer 5

1. Net income for tax purposes
2. (AII)
3. (Foreign business income)
4. Equals ABI

Question 6

Calculating basic tax

Answer 6

38% (general tax rate) x taxable income

Question 7

Federal tax abatement

Answer 7

10% of taxable income (allocated to each province where there is a PE)

Question 8

Small business deduction - reduced if:

Answer 8

1. taxable capital is over $10M

2. AII for the preceding year is over $50K

Question 9

Small business deduction - calculation

Answer 9

19% x least of

1. ABI earned in canada
2. taxable income less
   i. 100/28 x FTC on foreign non-business income
   ii. 4 x FTC on foreign non-business income
3. annual business limit allocated to the company

Question 10

Taxable capital - calculation

Answer 10

1. Share capital
2. Contributed surplus
3. Retained earnings
4. Reserves not deductible for tax
5. loans and advances payable
6. debt represented by bonds, notes, mortgages
7. (allowance for investments in debt and equity of other corporations

Question 11

MFG and processing (M&P) credit - calculation

Answer 11

13% x least of

1. M&P profits, less amounts eligible for SBD
2. taxable income less (amount eligible for SBD + 4 x FTC on FBI + AII [for CCPCs only])

Question 12

General rate reduction - calculation

Answer 12

1. Taxable income
2. (Income eligible for SBD [CCPCs only])
3. (Income eligible for M&P profits deduction
4. (AII included in taxable income)
5. Equals Full rate taxable income

Question 13

Additional Refundable Tax (ART) - calculation

Answer 13

10 2/3% of the lesser of

1. AII included in taxable income
2. taxable income less amount eligible for SBD

Question 14

Determine Part IV Tax - calculation

Answer 14

1. 38 1/3% x dividend received from non-connected taxable Canadian corporations
2. investors share of dividend refund received by a connected corporation

Question 15

RDTOH refunded - calculation

Answer 15

lesser of

1. 38 1/3% of taxable dividends paid
2. RDTOH at end of year (Before dividend refund)