Compute the dividend refund for 2018 and the amount of any

Taxation Assignment

James Bond Incorporated is a Canadian-controlled private corporation located in Windsor, Ontario. For its fiscal year ended December 31, 2018, the corporation had correctlycalculated its income for tax purposes under Division B as follows:

Canadian source:        

Retail income  ................................................................................................          $320,000

Advertising agency loss          ........................................................................            (60,000)

Rental income from warehouse fully rented on a five-year lease .....................          70,000

Consulting income      ....................................................................................           125,000

Interest on outstanding accounts receivable in retailing business .....................           15,000

Recapture of CCA from sale of fixtures used in retailing business .......          65,000

Interest income from five-year bonds ...................................................................       90,000

Foreign non business income.............................................................     200,000

Taxable capital gain    ............................................................................................      35,000

Dividends from non-connected taxable Canadian corporations ....................27,000

Division B net income for tax purposes          .................................................           $887,000

Additional information:          

James Bond Inc. made the following selected payments during the year:    

Charitable        donations        ................................................................        155,000

Taxable            dividends        ............................................................           160,000

Withholding tax on the non-business income was .........................         45,000

The balances in the tax accounts on December 31, 2017 were:

Charitable donations from 2015 ....................................................................            $ 5,000

Non-capital losses from 2014 ....................................................................... 78,000

Net capital losses from 1999   ......................................................................  54,000

Refundable dividend tax on hand      ................................................            30,000

Dividend refund for 2017      ..................................................................      17,000

James Bond Inc. allocated $350,000 of its $500,000 business limit to other associated corporations.

Taxable income earned in Ontario, which is the Canadian jurisdiction in which James Bond Inc. operates, is approximately 75% of the total.

James has asked you to:

(A) Compute the federal Part I tax and provincial tax at a 13.5% rate on federal taxable income for the 2018 taxation year. Show in detail the calculation of all deductions in the computation, using a separate schedule for each special deduction. In calculating the small businessdeduction list all ineligible items of income, if any, and indicate the amount of the business limitavailable for the subsidiary.

(B) Compute the dividend refund for 2018 and the amount of any RDTOH to be carried forward.


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