Division C Deductions - Corporate

Question 1

Taxable income calculation

Answer 1

• NIFTP - Division C Deductions = taxable income

Question 2

Division C Deductions

Answer 2

1) charitable donations (s. 110) (sch. 2)
2) loss carryovers (s. 111) (sch. 4)
3) dividends received from CAD residents (s. 112) (sch. 3)

Question 3

Division C Deductions for personal tax payers (not available to corporations)

Answer 3

• employee stock options
• social assistance/workers compensation deduction
• LCGE
• northern residents deductions

Question 4

Charitable donations

Answer 4

• individuals get a credit while corporations get to deduct donation from NIFTP (only charitable donations are deductible, NOT political)
• deduction limited to 75% of net income for tax purposes
• can carry unused amounts forward for 5 years and use FIFO method to apply

Question 5

Loss carryovers

Answer 5

• Non capital loss: applied against any income type, carryback 3 years, carryforward 20 years
• Net capital loss: apply against CG in current year, carryback 3 years, carryforward indefinitely
• ABIL: apply against any type of income, carryback 3 years, carryforward 10 years then convert to net capital loss (indefinitely)
• Farm loss: apply against any income type, carryback 3 years, carryforward 20 year
• Restricted farm loss: apply against farming income, carryback 3 years, carryforward 20 years

Question 6

Dividends received from Canadian corporations

Answer 6

• corporations do not receive a dividend tax credit like individuals do
• individuals receive a tax credit because the rate is intended to be the tax paid at the corporate level, that is why corporations do not pay tax on the dividends they receive from other CAD corp. because the dividend is paid out of post tax earnings from R/E, so rather than taxing at corporate level again, it is taxed at the shareholder level when receiving corporation pays out dividends.
• such dividends include: dividends from… Canadian corporation, subsidiary corporation, non-resident carrying on business in Canada, dividends from FA that have been taxes in foreign jurisdiction with treaty with Canada