Tecniquip Limited is a public corporation whose head office is located in Toronto, Ontario. The activities of the corporation are carried on through permanent establishments in the provinces of Ontario and Alberta.

For the year ended December 31, 2020, Tecniquip Limited obtained the following results:

Income from distribution operations in Ontario . . $1,000,000

Income from distribution operations in Alberta. .. . 1,040,000

$2,040,000

Canadian-source interest income (investment) 32,000

Taxable capital gain . . . ... 10.000

Taxable dividends from taxable Canadian corporations 15,000

Net income under Division B . . . 2,097,000

In computing income from distribution, the corporation claimed a deduction of $150,000 under subsection 37(1) of the Act for SR&ED. No SR&ED expenditures are expected to be made in 2021.

During the year, the corporation made charitable donations totalling $60,000 and claimed non- capital losses of $60,000 and the net capital losses carried forward from 2015 of $6,000.

You have been asked to calculate the federal Part I tax payable. Show all calculations, whether or not necessary to your final answer.

Answer:

Federal tax payable will be $282,150.

Step-by-step explanation

Net income 2097000

Deductions 150000

Charitable donations 60000

Non capital losses 60000

Net capital losses carried forward 6000

So, we first determine the net income for tax purposes and then the taxable amount and finally finish by determine the Part I tax.

Item                                                                                         Amount

Net income                                                                              $2,097,000

+ Charitable donation                                                                    60,000

Net income for tax purposes                                                   $2,157,000

Division C deductions (deductions+ non-capital losses +           276,000

Charitable deductions + net capital loss)

We included net capital loss because there was a taxable

Capital gain.

Taxable income (net income for tax purposes - Division C  $1,881,000

Deductions)

Part I tax

Item                                                                                         Amount

Basic federal tax (38/100 x 1881000)                                    $714,780

Less abatement (10/100 x 1881000)                                        188,100

                                                                                               = $526,680

Less general rate reduction (13/100 x 1881000)                    244,530

Part I federal tax payable                                                        =$282,150