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Bean Co Is a Canadian-Controlled Private Corporation with a December 31

Question 9

Essay

Bean Co. is a Canadian-controlled private corporation with a December 31 year-end. The company reported a net income of $200,000 on its financial statements in 20x7. Of this amount, $15,000 was from non-eligible dividend income received from a taxable Canadian corporation. The remaining income was from active business.
Additional information:
The non-eligible dividends were received from Grow Ltd., a connected Canadian-controlled private corporation. Grow has only one class of shares, and the total amount of non-eligible dividends paid in 20x1 was $50,000 which resulted in a non-eligible dividend refund of $9,000.
Bean Co. had a balance in its non-eligible RDTOH account of $3,000 at the end of 20x0. The company did not receive a dividend refund in 20x0.
Bean Co. is associated with Pea Co. Pea Co. used $220,000 of the small business deduction limit on its 20x1 tax return.
Bean Co.'s 20x1 profits include a donation expense of $1,000.
Amortization of $30,000 was expensed on Bean Co.'s income statement in 20x1. CCA has been correctly calculated at $28,500 for 20x1 and has not been transferred from the tax accounts to the financial statements. Bean Co. utilizes the maximum CCA deduction each year.
Bean Co. paid dividends totaling $5,000 during 20x1.
(None of the above is subject to rules pertaining to specified corporate income, excessive income from passive investments, or taxable capital in excess of $10 million.)
Required:
A) Calculate Bean Co.'s 20x1 net income for tax purposes.
B) Calculate Bean Co.'s 20x1 taxable income.
C) Calculate the small-business deduction for Bean Co. for 20x1 (using the rules applicable for 2019). Identify the values for Bean Co.'s active business income, taxable income, and annual limit amount in your answer.
D) Calculate Bean Co.'s 20x1 Part IV tax on non-eligible dividends and dividend refund from non-eligible RDTOH, if applicable.

Correct Answer:

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