Exam 11: Corporationsan Introduction

Band Inc.is a public Canadian corporation which was established five years ago.The company's head office is located in Saskatchewan.A small branch was established in Manitoba last year. The company's books show the following for the current year: Sales in Saskatchewarn \ 5,000,000 Sales in Maritoba \ 1,000,000 Total labour costs of the compary \ 2,000,000 Labour costs paid in Saskatchewarn \ 1,500,000 Wages at the Marnitoba branch \ 500,000 Inconne from operations in Saskatchewarn \ 550,000 Incorne from operations in Maritoba \ 100,000 Dividend received from a taxable \ 50,000 Carnadiarn corporation A.Calculate the company's net income for tax purposes for the current year. B.Calculate the company's taxable income, both federal and provincial.(Round all amounts to two decimal places.) C.Calculate Band Inc.'s Part I federal tax liability.(Round all amounts to zero decimal points.) Use rates applicable for 2020.

Katt Co.began operations two years ago (Year 1) and recognized $37,000 in business income and $1,000 in taxable capital gains that year.Last year (Year 2) the company incurred a business loss of $25,000, a taxable capital gain of $2,000, and an allowable capital loss of $5,000.During the current year (Year 3) business income was $50,000, taxable capital gains were $4,000, and the company received $10,000 in dividends from a taxable Canadian corporation.Katt Co.utilizes any unused losses in the earliest years possible, Which of the following taxable incomes are correct after all carry-over adjustments have been made?

Using general terms, explain how a change in control of a corporation can affect the net-capital losses and the non-capital losses.

Which of the following statements accurately describes the tax treatment of Canadian corporations?

Many corporations carry on business in more than one province.Assuming a corporation from Newfoundland wishes to conduct business in Nova Scotia, the corporation will not pay tax in Nova Scotia if

The Great Big Cookie Corp.(GBCC) is a Canadian controlled private corporation which realized a total net income for tax purposes of $230,000 in 2020.During the year, GBCC received $25,000 in dividends from a taxable Canadian corporation during the year, and they also donated $15,000 to a registered charity.What is GBCC's taxable income in 2020?

Spider Ltd.had the following accounts in 2020: Revenue $100,000, COGS $65,000, Salaries $45,000, Gain on Sale of Assets $20,000, Administrative Expenses $8,000.Which of the following is correct?

Which of the following scenarios is not an allowable tax transaction?

The Honeymoon Co.is a Canadian controlled private corporation with active business income of $750,000 in 2020.Dividends were received during 2020 from a taxable Canadian corporation in the amount of $80,000.The company recognized a $50,000 capital gain during 2020.The company's year-end is December 31^st. Additional information is as follows: Net capital loss carry-over from 2019 is $30,000. Non capital loss carry-over from 2019 is $70,000. Required: Calculate the following for the company for the 2020 tax year: A.Net income for tax purposes B.Taxable income C.Part I Federal Tax - Identify amounts for 1) basic federal tax, 2) federal abatement, 3) refundable tax on investment income, 4) small business deduction, 5) general rate reduction), and 6) the total federal tax.

Rainbow Co.is a Canadian controlled private corporation with active business income of $350,000 in 2020.The company engages in retail and wholesale activities.Capital gains recognized by the company in 2020 totaled $84,000.Rainbow Co.will utilize a net capital loss carry-over of $28,000 on its 2020 tax return. Required: Calculate the following for Rainbow Co.for 2020: A.Net Income for Tax Purposes B.Taxable Income C.Part I Federal Tax - Identify amounts for 1) basic federal tax, 2) federal abatement, 3) refundable tax on investment income, 4) small business deduction, 5) general rate reduction), and 6) the total federal tax. A. Business income \ 350,000 Taxable capital gain (\ 84,000X.5) 42,000 Net Income for Tax Purposes \ 392,000 B. Less: Net-capital loss -28,000 Taxable Income \ 364,000 C. Primary federal tax \ 364,000\times38\%= 1) \ 138,320 Less federal abatement \ 364,000\times10\%= 2) -36,400 Refundable tax on investment income: 102/3\times lessor of: $\$ 14,000 \text { aggregate investment income (taxable capital gain less net-capital loss) }$ \ 14,000 (TI \ 364,000- SBD amount \ 350,000) 3) 1,493 Less small business deduction: 19\%\times the lessor of: Taxable income \ 364,000 Active business income \ 350,000 4) -66,500 Small business annual limit \ 500,000 General tax reduction 13\%-(\ 364,000-\ 350,000-\ 14,000) 5) 0 Part I Federal Tax 6) \ 36,913

Khensu Ahmed incorporated a small Canadian controlled private corporation in 2018.The company pays non-eligible dividends.The balance sheet for 2020 is as follows: $\text { BALANCE SHEET, DEC. 31, } 2020$ Assets \ 20,000 Share Capital \ 3,000 Retained Earnings \ 17,000 \ 20,000 \ 20,000 A.Determine the tax that Khensu will realize as a shareholder if the company is sold. B.Determine the tax that Khensu will realize as a shareholder if the corporation is wound up.

The Canadian tax system practices integration between corporations and individuals in order to address and reduce double taxation.The following information has been provided for analysis purposes: Corporate income \ 200,000 Non-eligible dividends paid to shareholder 174,000 Corporate tax rate 13\% Personal tax rate 50\% Marginal non-eligible dividend tax rate 43\% Required: Using the data provided, demonstrate numerically the concept of integration.

When shares are transferred from one group of shareholders to another and there is a change in control, which of the following applies?