Formed in 2008,ABC Ltd.had taxable income of $95,000 in 2008; $70,000 in 2009; $55,000 in 2010; $80,000 in 2011,and -$150,000 in 2012.What is the adjusted corporate tax payment in 20012? Assume that ABC is a CCPC in Manitoba with a combined federal and provincial corporate income tax rate of 13%.

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Quizplus · Accepted Answer

In CCPCs, there is a small business deduction available that reduces the corporate tax rate to 11%. Therefore, the taxable income in 2012 is -$150,000 - $500,000 = -$650,000. The loss can be carried back three years and forward twenty years. Since there was taxable income in the previous three years, ABC can carry back the loss to the year with the highest taxable income, which is 2011. This means that ABC can apply the tax rate of 13% on a taxable income of $0 for 2012. Thus, the adjusted corporate tax payment in 2012 is $0. Therefore, choice C is the best answer as it is the only one less than the other answer reached.