Canadian Income Taxation
Quiz 13 :
The Canadian-Controlled Private Corporation
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Q06 Q06 Q06
The following diagram depicts the ownership structure of two CCPCs. Bob Ligh is Lisa Light's son. Sarah Paint and Alan Canvas are not related to Bob and Lisa in any manner, what-so-ever. All of the shares held are common. Required: A) Determine if the two companies are associated, referring to the applicable section of the Income Tax Act. B) Briefly explain what the most significant tax implication is when two or more corporations are associated.
Q07 Q07 Q07
Beans Co. is a Canadian-controlled private corporation with a December 31 year-end. The company had profits of $200,000 during the year. Of this amount, $15,000 was from dividend income received from a taxable Canadian corporation. The remaining income was from active business. Additional information: The dividends were received from Grow Ltd., a connected Canadian-controlled private corporation. Grow has only one class of shares, and the total amount of dividends paid was $50,000. Grow received a refund of $9,000 as a result of paying the dividend. Beans Co. had a balance in its Refundable Dividend Tax on Hand Account of $3,000 at the end of the previous year. Beans Co. is associated with Peas Co. which used $220,000 of the small business deduction limit this year. The profits include a donation expense of $1,000. Amortization of $30,000 was expensed during the year. CCA has been correctly calculated at $28,500 and has not been transferred from the tax accounts to the financial statements. Beans utilizes the maximum CCA deduction each year. Required: A) Calculate the small-business deduction for Beans Co. for the current fiscal year. B) Calculate the Part IV Tax for Beans Co. for the current fiscal year.
Q08 Q08 Q08
Chartered Tours Inc. (CTI) started operations this year and had a net income for tax purposes of $800,000. (Chartered Tours Inc. operates in a province which ha a provincial tax reduction on income earned from manufacturing and processing.) During the year, CTI: a) made a contribution of $25,000 to eligible charities; b) received $30,000 in dividends from taxable Canadian corporations; c) recognized manufacturing and processing profits of $250,000; and d) had active business income of $770,000. For tax purposes, CTI is associated with Rocky Mountain Hikers Inc. (RMHI). RMHI used $310,000 of the small business deduction for its active business income. Required: Calculate the following, ignoring provincial taxes: a) CTI's taxable income b) CTI's small business deduction c) The M & P deduction available to CTI d) CTI's general rate reduction e) The balance in CTI's GRIP account at the end of the year