Corporation X had a non-eligible RDTOH balance of $15,000 at the end of 20x0, and the dividend refund from non-eligible RDTOH to the company in 20x0 was $7,000. The company's Part IV tax on non-eligible dividends for 20x1 is $8,000. The company's active business income is $475,000 and its taxable income is $410,000. Corporation Y (which is associated with Corporation X) was allocated $125,000 of the small business deduction in 20x1. (Corporation Y only has active business income.) Corporation X has investment income which remained at $45,000 in both 20x0 and 20x1. The total taxable capital of the two corporations is less than $10 million. Part I tax for 20x1 was $55,000. What is Corporation X's non-eligible RDTOH balance at the end of 20x1? (Round all numbers)

Question

Quizplus · Accepted Answer

To calculate the non-eligible RDTOH balance at the end of 20x1, we need to take into account the following:

1. Part I tax for 20x1 is $55,000. This tax provides refundable RDTOH of $27,500 ($55,000 x 0.5).
2. The company's Part IV tax on non-eligible dividends for 20x1 is $8,000.
3. The company had a non-eligible RDTOH balance of $15,000 at the end of 20x0.
4. The dividend refund from non-eligible RDTOH to the company in 20x0 was $7,000.
5. The company's taxable income for 20x1 is $410,000.

Based on these factors, we can calculate the non-eligible RDTOH balance at the end of 20x1 as follows:

Non-eligible RDTOH balance at end of 20x0: $15,000
Plus: Dividend refund from non-eligible RDTOH in 20x0: $7,000
Plus: Part I tax refundable RDTOH in 20x1: $27,500
Minus: Part IV tax on non-eligible dividends in 20x1: $8,000
Minus: Non-eligible dividend refund in 20x1: ($410,000 - $475,000) x 0.3816 = -$24,333
Equals: Non-eligible RDTOH balance at end of 20x1: $26,733

Therefore, the best choice is C ($26,733).

Corporation X Had a Non-Eligible RDTOH Balance of $15,000 at the End