chap18 - CHAPTER 18 Partnerships and Trusts Problem 1 [ITA:...

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Unformatted text preview: CHAPTER 18 Partnerships and Trusts Problem 1 [ITA: 53(1)( e ); 53(2)( c )] The following income statement was prepared for Ludlum, Clancy, Follet & Associates, a partnership comprised of four partners who share income equally. Ludlum, Clancy, Follet & Associates I NCOME S TATEMENT for the year ended December 31, 2005 Gross revenue. ........................................................................... $994,250 Less: Professional staff employee salaries. ............. $229,000 Office salaries. ............................................... 74,000 Rent. .............................................................. 42.000 Office supplies. .............................................. 17,000 Client entertainment. ..................................... 5,075 Capital cost allowance. .................................. 16,222 Donations to charities. ................................... 250,000 633,297 $360,953 Gain on sale of securities of public companies. .... $100,000 Dividend income: Dividends received from taxable Canadian corporations. .................................................. 25,000 Capital dividends. .......................................... 5,000 130,000 Net income for accounting purposes. .................... $ 490,953 The adjusted cost base to Mr. Clancy of his partnership interest was $45,792 at the beginning of the year. His drawings for the year were $77,500. REQUIRED (A) Compute the partnership income for the year, the income to be allocated to Mr. Clancy and the nature of the income. (B) Compute Mr. Clancys taxable income and tax payable for 2005 assuming a marginal federal tax rate of 29%. Assume a provincial tax on income rate of 17%. (C) Compute the adjusted cost base to Mr. Clancy of his partnership interest. 183 Introduction to Federal Income Taxation in Canada Solution 1 (A) Net income per financial statements. .................................................................................. $ 490,953 Add: Client entertainment. ........................................................................................... 5,075 $ 496,028 Deduct: Client entertainment 1...................................................................................................... $ 2,538 Gain on securities of public companies. .............................. 100,000 Capital dividends. ................................................................ 5,000 107,538 $ 388,490 Add: Donations to charities. ......................................................... $ 250,000 Taxable capital gain on securities 2 ....................................... 50,000 300,000 Income to be allocated. ....................................................................... $ 688,490 Mr. Clancys share ( 1 / 4 $688,490). .....................................................
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This note was uploaded on 03/10/2010 for the course ACC ACC742 taught by Professor Sydor during the Spring '10 term at Ryerson.

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chap18 - CHAPTER 18 Partnerships and Trusts Problem 1 [ITA:...

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