Calculate the tax liability for a small Canadian-controlled private corporation (CCPC) located in British Columbia having earnings before taxes (EBT) of $480,000. The relevant combined federal and provincial corporate income tax rates are 15.5% for taxable income up to $400,000 and 18.6% for the amount exceeding $400,000.

Question

Quizplus · Accepted Answer

First, we need to find the taxable income by deducting the federal and provincial small business deduction of $500,000 from EBT of $480,000:
Taxable Income = $480,000 - $500,000 = -$20,000
Since the taxable income is negative, there is no tax liability. Therefore, the answer is not A, C or D. 
Note: If the taxable income is positive, we would apply the federal and provincial tax rates as follows: 
Federal tax = $400,000 x 15.5% = $62,000
Provincial tax = ($480,000 - $400,000) x 18.6% = $14,040
Total tax liability = $62,000 + $14,040 = $76,040
However, since the taxable income is negative in this case, the tax liability is $0.

Calculate the Tax Liability for a Small Canadian-Controlled Private Corporation