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Tax - Ch11 Solutions

# Tax - Ch11 Solutions - \$15,000 KC 11-9[ITA 123(1 124(1...

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CHAPTER 11 CORPORATIONS AN INTRODUCTION KC 11-3 [ITA: 110.1(1), 111(1)(a),(b), 112(1), 127(3) – Taxable income, Political tax credit] Nelson Ltd’s taxable income is \$215,000. Net income \$300,000 Dividends from taxable Canadian corporations (20,000) Donations (limited to 75% x net income) (40,000) Net capital losses (limited to net taxable capital gains) (15,000) Non-capital losses (10,000 ) Taxable income \$215,000 KC 11-7 [ITA: 123(1), 124(1), 123.4(2) – Corporate tax calculation] ITA 123(1) Basic federal tax - \$100,000 x 38% \$38,000 ITA 124(1) Federal abatement - \$100,000 x 10% (10,000 ) 28,000 ITA 123.4(2) General tax reduction - \$100,000 x 13% (2012) (13,000 ) Federal tax
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Unformatted text preview: \$15,000 KC 11-9 [ITA: 123(1), 124(1), 123.4(2), 125.1; Reg. 5200, 5201, 5202 – M&P deduction] Before determining the M&P deduction, it is necessary to derive the M&P profit in accordance with the prescribed rules. Manufacturing capital (MC) Manufacturing depreciable property \$800,000 x 10% x 100/85 = \$94,118 Total capital (TC) Total depreciable property \$1,100,000 x 10% = \$110,000 Manufacturing labour (ML) = \$1,000,000 x 100/75 = \$1,333,333 Total labour (TL) = \$2,200,000 Adjusted business income = \$300,000 + \$500,000 = \$800,000 M&P profit = MC \$94,118 + ML \$1,333,333 x \$800,000 = \$494,355 TC \$110,000 + TL \$2,200,000 M&P deduction – 13% x \$494,355 = \$64,266...
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