Mira Glow Ltd. is a CCPC throughout the 2020 taxation year. For 2019, the company had Taxable Capital Employed in Canada of $14,000,000. The corresponding figure for 2020, was $15,000,000. What is the annual SR&ED expenditure limit for Mira Glow Ltd. for 2020?

Question

Quizplus · Accepted Answer

The annual SR&ED expenditure limit for a CCPC is calculated as follows:
- For the first $3,000,000 of eligible SR&ED expenditures, the expenditure limit is 35%.
- For expenditures beyond the $3,000,000 threshold, the limit is 15%.

To calculate the expenditure limit for Mira Glow Ltd. for 2020, we first need to determine the taxable capital employed in Canada (CACE) for the previous year (2019):

CACE 2019 = $14,000,000

We can use this number to calculate the expenditure limit for 2020:

Expenditure limit for first $3,000,000 of eligible SR&ED expenditures = 35% x $3,000,000 = $1,050,000

Expenditure limit for remaining eligible SR&ED expenditures = 15% x ($15,000,000 - $3,000,000) = $1,800,000

Total expenditure limit for 2020 = $1,050,000 + $1,800,000 = $2,850,000

Therefore, the best choice is B ($2,700,000) as it is the closest value to the calculated expenditure limit.