prob12 11
Problem 12-11
(Past exam question: 27 minutes)
(Text: Ch. 12)
The following selected and accurate information of its fiscal year ending on December 31, 2014 has been gathered from the books and other records of Vermisht Ltd., a Canadian-controlled private corporation.
Income for Tax Purposes: Retail operations - Canada $180,000 - United States branch (Note 2) 93,100 Maintenance and service operations - Canada 50,000 - United States branch (Note 2) 37,500 Interest income from Canadian sources (Note 3) 58,750 Dividends from taxable Canadian corporations (Note 4) 81,250 Taxable capital gains 25,000 Recapture of CCA (Note 5) 66,250 Rental income from United Kingdom (Note 6) 43,750
Division B income $635,600
Deductions:
Donations $18,750 Dividends from taxable Canadian corporations 81,250 Non-capital losses 56,250 Net capital losses 12,500 168,750
Taxable income $466,850
Notes and additional information:
(1) The accountant has correctly determined that the Part I tax excluding the additional refundable tax is $85,800 and the small business deduction for 2014 is $51,000.
(2) The United States income above is expressed in Canadian dollars. During 2014, income taxes of $31,250 ($Cdn) were paid to the various levels of U.S. governments and the same amount was correctly deducted under ssec. 126(2) in order to arrive at the Part I tax.
(3) The Canadian interest is from the following sources: Interest on debt loaned to a Canadian subsidiary, Shmaltz Ltd., of which Vermisht Ltd. owns 80% of the shares; Shmaltz Ltd. does not carry on an active business $45,000 Treasury bill interest from seasonal excess cash 10,000 Bank interest on fluctuating cash working capital 3,750 $58,750
Problem 12-11 (Cont.)
(4) Dividends: Portfolio dividends from non-connected companies received March 31 $18,750 Dividends from Shmaltz Ltd., received
(Past exam question: 27 minutes)
(Text: Ch. 12)
The following selected and accurate information of its fiscal year ending on December 31, 2014 has been gathered from the books and other records of Vermisht Ltd., a Canadian-controlled private corporation.
Income for Tax Purposes: Retail operations - Canada $180,000 - United States branch (Note 2) 93,100 Maintenance and service operations - Canada 50,000 - United States branch (Note 2) 37,500 Interest income from Canadian sources (Note 3) 58,750 Dividends from taxable Canadian corporations (Note 4) 81,250 Taxable capital gains 25,000 Recapture of CCA (Note 5) 66,250 Rental income from United Kingdom (Note 6) 43,750
Division B income $635,600
Deductions:
Donations $18,750 Dividends from taxable Canadian corporations 81,250 Non-capital losses 56,250 Net capital losses 12,500 168,750
Taxable income $466,850
Notes and additional information:
(1) The accountant has correctly determined that the Part I tax excluding the additional refundable tax is $85,800 and the small business deduction for 2014 is $51,000.
(2) The United States income above is expressed in Canadian dollars. During 2014, income taxes of $31,250 ($Cdn) were paid to the various levels of U.S. governments and the same amount was correctly deducted under ssec. 126(2) in order to arrive at the Part I tax.
(3) The Canadian interest is from the following sources: Interest on debt loaned to a Canadian subsidiary, Shmaltz Ltd., of which Vermisht Ltd. owns 80% of the shares; Shmaltz Ltd. does not carry on an active business $45,000 Treasury bill interest from seasonal excess cash 10,000 Bank interest on fluctuating cash working capital 3,750 $58,750
Problem 12-11 (Cont.)
(4) Dividends: Portfolio dividends from non-connected companies received March 31 $18,750 Dividends from Shmaltz Ltd., received