question archive Question 1 Brian, a Canadian resident, is the owner-manager of two corporations on January 1st, 2020, detailed below: Shooting Star Inc
Question 1 Brian, a Canadian resident, is the owner-manager of two corporations on January 1st, 2020, detailed below: Shooting Star Inc
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Question 1
Brian, a Canadian resident, is the owner-manager of two corporations on January 1st, 2020, detailed below:
Shooting Star Inc.
Brian is the sole shareholder of Shooting Star Inc, a CCPC. He started the corporation last year and invested $200,000 in exchange for 1,000 common shares.
The corporation did quite well in 2020. Their Division B income is computed as follows:
Business income $180,000
Taxable Capital Gain on Equipment $50,000
Interest Income from Bonds $70,000
Dividends from Meteor Inc. (Non-Eligible) $60,000
Division B Income $360,000
Shooting Star Inc. owns 60% of Meteor Inc. Meteor Inc. claimed a $30,000 dividend refund (taken out of their non-eligible RDTOH balance) from the dividends that they paid.
Shooting Star Inc. has a non-capital loss carryforward of $15,000 from last year's operations.
The corporation has less than $10M of taxable capital. They have no associated corporations in 2020 after Curtains Inc. is sold.
The corporation did not have an RDTOH balance at the beginning of the year.
The corporation paid a $25,000 non-eligible dividend to Brian on December 15th, 2020.
Curtains Inc.
Brian is the sole shareholder of Curtains Inc, a CCPC. He started the business by investing $50,000 in exchange for 1,000 common shares back in 2014. He has held these shares since starting the business.
On January 2nd, 2020, he decided to retire from the curtain business, and sold all his shares for $120,000. Brian has used $300,000 of his lifetime capital gains deduction in prior years. Brian has $10,000 of net capital loss carryforwards from prior years.
The corporation's assets are as follows:
Asset Tax Value FMV
Accounts Receivable $25,000 $30,000
Shares of Sunshine Inc. $60,000 $90,000
Inventory $30,000 $45,000
Land $54,000 $80,000
Building (Cost: $25,000) $13,000 (UCC) $30,000
Equipment (Cost: $35,000) $22,000 (UCC) $20,000
Goodwill $0 $60,000
Total: $355,000
Curtains Inc. owns 3% of Sunshine Inc.
Curtains Inc.'s balance sheet has not substantially changed (proportionally) in the previous 3 years.
REQUIRED
a) Compute the federal Part I tax, Part IV tax, dividend refund, and RDTOH balances for Shooting Star Inc. during the 2020 taxation year. Show in detail the calculations of all tax deductions.
b) Compute Brian's taxable income for the taxation year 2020, assuming his only income is from his involvement in both corporations.
