Reference no: EM132695018
Manitoba Traders Ltd. is a Canadian-controlled private corporation located in Winnipeg, Manitoba. For its fiscal year ended December 31, 2020, the corporation had correctly calculated its income for tax purposes under Division B as follows:
Operating income (Note 1) $ 387,000
Profit on the sale of excess land (Note 2) 200,000
Foreign business income in Cdn$ (Note 3) 105,000
Royalty income 15,000
Retailing income 210,000
Interest on o/s accounts receivable in retailing business 14,500
Recapture of CCA (Note 4) 30,500
Advertising agency loss (53,500)
Rental income (Note 5) 36,500
Taxable capital gains net of losses (from active assets) 63,000
Interest income from five-year bonds 10,000
Div from non-connected taxable Canadian corporations(eligible) 9,000
Foreign non-business income in Cdn$ (Note 6) 25,000
Division B net income for tax purposes $ 1,052.000
Notes:
(1) This amount of operating income was computed correctly under Division B. The corporation has permanent establishments in Manitoba and North Dakota in the United States. Its gross revenue and salary and wages information is as follows:
Manitoba North Dakota
Gross revenue $10,325,000 $3,675,000
Salaries and wages 5,375,000 993,000
(2) The land had been held for approximately three years. It had been held vacant in order to realize a profit on its sale at the right time. The corporation has bought and sold land for a profit several times in the few years.
(3) Withholding tax on the foreign business income was C$14,000 which represents the foreign tax credit available to the corporation
(4) The recapture resulted from the sale of some fixtures used in the retailing business.
(5) The rental income was determined to be property income.
(6) Withholding tax on the foreign non-business income was C$5,000 which represents the foreign tax credit available to the corporation
Additional information:
(a) Manitoba Traders Ltd. made the following selected payment during the year:
Charitable donations $28,000
(b) Four quarterly dividends (non-eligible) of $45,000 were declared at the end of each calendar quarter of 2020 and paid within two weeks of their declaration. The last quarter of 2020 was paid in January 2021 and a dividend (non-eligible) of $30,000 declared in the last quarter of 2019 was paid in January 2020.
(c) Manitoba Traders Ltd. had allocated $150,000 of its business limit to other associated corporations. Taxable capital of the associated group for large corporations tax purposes was $8,000,000.
(d) The balance in the tax accounts on January 1, 2020 were:
Non-capital losses from 2014 46,500
Net capital losses from 2015 14,500
Refundable dividend tax on hand (non-eligible) 20,000
Refundable dividend tax on hand (eligible) NIL
Dividend refund for 2019 (non-eligible) 18,000
GRIP balance at the end of 2019 NIL
Required:
Question (A) Compute federal Part I tax payable for 2020. Show in detail the calculation of all tax deductions in the computation.
Question (B) Compute the refundable tax on hand balance as at December 31, 2020, showing in detail your calculation and compute the dividend refund for 2020.
Question (C) Compute the corporations GRIP balance at December 31, 2020