Morgan Ltd., a CCPC, had a $25,000 balance in its Refundable Dividend Tax On Hand (RDTOH) account on December 31, 2010, the end of its taxation year.Its refundable por- tion of Part I tax, before any refunds, for the 2011 year is $10,000.It did not receive any dividends in 2011.Morgan Ltd.paid dividends of $15,000 in each of 2010 and 2011.What is the balance in Morgan Ltd.'s RDTOH account at December 31, 2011?

Question

Quizplus · Accepted Answer

The refundable portion of Part I tax for the 2011 year is $10,000, which will be added to the RDTOH account. Since there were no dividends received in 2011, the RDTOH balance at the end of 2011 will be equal to the total refundable portion of Part I tax ($10,000) plus the balance at the end of 2010 ($25,000) for a total of $35,000. However, since Morgan Ltd. paid dividends in 2011, it will have to pay non-eligible dividends tax of $3,750 ($15,000 x 25%), which will reduce the RDTOH balance to $31,250. Therefore, the correct answer is B) $30,000.