Green Co. and Blue Co. are equal partners in Turquoise Paint. Turquoise Paint had a net income for tax purposes this year of $300,000, before deducting capital cost allowance.
Green Co. is a CCPC owned by Bob Green. Green Co.'s net income for tax purposes is $200,000. Blue Co. is a CCPC owned by Sally Blue. Blue Co. has suffered net losses the past two years. This year Blue Co. had a loss of $150,000, and the company has non-capital losses of $200,000 which will expire in two years.
The capital cost allowance for Turquoise Paint this year is $72,000.
Required:
Based solely on the facts provided:
A) Calculate the partnership net income for tax purposes that Bob would likely prefer to use, and explain why.
B) Calculate the partnership net income for tax purposes that Sally would likely prefer to use, and explain why.
Correct Answer:
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