Reference no: EM133146350

Question - Why Limited is a Canadian-controlled private corporation operating solely in Newfoundland and Labrador. For its taxation year ended December 31, 2021, the company reported the following income under Division B:

Active business income $85,000

Taxable capital gain (non-active) 37,500

Canadian-source interest income 45,000

Taxable portfolio dividends from Canadian-resident public corporations (eligible) 18,750

Income under Division B $186,250

The corporation is carrying forward the following amounts:

Non-capital losses $40,000

Net capital losses (arising in 2016) 52,000

The balance in both refundable dividend tax on hand accounts at December 31, 2020 was nil. On November 30, 2021, the company paid $112,500 in taxable dividends (all non-eligible) to its shareholders all of whom are individuals. The taxable portfolio dividends of $18,750 were received on November 1, 2021.

Required -

(A) Compute the federal Part 1 tax and provincial tax at a 4% rate for income eligible for the small business deduction and a 12% rate for income not eligible for the small business deduction payable by the company for 2021. For purposes of the small business deduction, assume investment income earned in the prior year is the same as the amount earned in the current year.

(B) Compute the refundable dividend tax on hand balance as at December 31, 2021, and compute the dividend refund for 2021.