A Ltd. is a Canadian controlled private corporation that operates a chain of fast-food restaurants. In its most recent fiscal year, the Company had the following financial results: The Company paid no foreign taxes on its foreign investment income. A Ltd. is not associated with any other corporations. Which one of the following amounts represents the refundable portion of Part I tax?

Question

A Ltd. is a Canadian controlled private corporation that operates a chain of fast-food restaurants. In its most recent fiscal year, the Company had the following financial results:  The Company paid no foreign taxes on its foreign investment income. A Ltd. is not associated with any other corporations. Which one of the following amounts represents the refundable portion of Part I tax?

Quizplus · Accepted Answer

To calculate the refundable portion of Part I tax, we need to first calculate the federal Part I tax payable (Line 23) which is $182,000. We then multiply this by the refundable tax rate of 38.33% ($182,000 x 0.0833), to get a refundable tax amount of $15,166. However, as the company is eligible for the small business deduction, we need to calculate the reduced refundable tax by multiplying the refundable tax amount by the small business rate (10.5%) which gives us $1,592 ($15,166 x 0.105). Thus, the final refundable portion of Part I tax is $15,166 - $1,833 (Part III.7 tax payable) = $13,333.

A Ltd Is a Canadian Controlled Private Corporation That Operates a a Chain