Formed in 2009, the ABC Ltd. had an operating loss of $95,000, with projected taxable income of $70,000 in 2010, $55,000 in 2011, and $80,000 in 2012. What will be the corporate tax liability in
2012? Assume that ABC is a CCPC in Quebec with a combined federal and provincial corporate income tax rate of 19%.

Question

Quizplus · Accepted Answer

The operating loss of $95,000 can be carried forward to offset future taxable income. By 2012, the company will have offset the entire loss with its taxable income from 2010 and 2011, leaving $50,000 taxable in 2012. The tax liability is 19% of $50,000, which is $9,500.