Surplus Flashcards
What are the four types of surplus accounts to track?
Exempt, hybrid, and taxable, and pre-acquisition
How are dividends under exempt surplus taxed?
Tax-free in Canada, because you are entitled to a full deduction.
How are dividends paid out of a FA’s hybrid surplus taxed?
50% tax-fee, other 50% taxable with relief from hybrid underlying tax.
How are dividends paid out of taxable surplus taxed?
Taxable with relief for the underlying foreign tax.
How are dividends paid out of pre-acquisition surplus taxed
Tax free, but will reduce your ACB
When is exempt surplus computed?
On a cumulative basis starting on the first day of the tax year of the non-resident corporation in which it became a FA of th Canadian corporation.
How are surplus balances maintained for each Canadian corporation?
Maintained separately, on a 100% basis, and in the currency of the country in which the FA is resident or which may be reasonable in the circumstances.
Is there a pro-ration of earnings for earnings from an active business for the year of acquisition?
No, no pro-ration.
What are the five surplus accounts that need to be calculated?
Exempt surplus/deficit; hybrid surplus/deficit; hybrid underlying tax; taxable surplus/deficit; underlying foreign tax.
How is preacquisition surplus measured
The amount is not measured but generally tracked.
