Reference no: EM132582753

Tax Software Assignment Problem

RadionFaux Industries Ltd. (RIL) is a Canadian controlled private corporation, located at 123 ABC Street in Ottawa, Ontario K4E 1A1. Its Ontario Corporation tax account number is 1234567. Its phone number is (613) 111-1111. It was incorporated on February 24, 1990 in Ottawa.

The government's Crown Copyright no longer permits us to use fake Business Numbers in soft-ware problems. To reduce the number of ProFile's error messages because of this, enter NR (for not registered) in the Business Number field.

The Company has 1,000 shares of common stock issued and outstanding, all of which are held by Margaret Ottawa (SIN 527-000-301).
Ms. Ottawa, the president and director of the Company, is the person who should be contacted with respect to matters concerning the Company's books and records. She is the authorized person as well as the signing officer.

RIL is a retailer of pet supplies. All of its sales occur within Canada. It has net assets of $235,000 on December 31, 2018. This includes a few investments that Ms. Ottawa inherited from her father two years earlier.

RIL owns all of the 500 common shares of OttawaFaux Inc., which holds most of the invest¬ments Ms. Ottawa inherited from her father. The common shares have a book value of $1,200,000. OttawaFaux Inc. has the same location and phone number as RadionFaux Indus¬tries Ltd. OttawaFaux Inc. has a December 31 fiscal year end. Enter NR (for not registered) in the Business Number field for OttawaFaux Inc.

OttawaFaux Inc. is also involved in earning active business income through the breeding and sale of championship dogs. It has total assets of $2,000,000 and total revenues for 2018 of $200,000. Its Taxable Capital Employed In Canada was $350,000 as at December 31, 2017, and $365,000 as at December 31, 2018.

The following information applied to RIL:

Taxable Capital Employed In Canada - 2017              $328,000

Taxable Capital Employed In Canada - 2018               411,000

Total Assets As At December 31, 2018                                     750,000

RDTOH As At December 31, 2017                                5,200

Dividends Declared And Paid During 2017                         Nil

GRIP Balance As At December 31, 2017                      11,750

Capital Dividend Account As At December 31, 2017         6,000

RIL does not use International Financial Reporting Standards (IFRS). For the taxation year ending December 31, 2018, RIL's Income Statement, before any deduction for income taxes, was as follows:

Note 1 This interest is net of $2,000 in taxes withheld in Ireland.

Note 2 As a result of paying this $42,000 in dividends to RIL, OttawaFaux Inc. received a dividend refund of $14,000.

Note 3 On March 23, 2018, RIL sold 2,700 shares of Canadian Imperial Bank of Commerce. The common shares had cost $118,800 on June 6, 2015 and were sold for net proceeds of $145,800.

Other Information:
1. Expenses include a deduction for charitable donations to the Ottawa Civic Hospital in the amount of $5,000.

2. RIL's Expenses include penalties of $3,500 resulting from a judgment in the Tax Court Of Canada.

3. RIL reimbursed Ms. Ottawa $34,000 for business meals and entertainment for clients and suppliers during the year.

4. During the year, RIL incurred $20,000 in landscaping costs. For accounting purposes these are being treated as a capital asset, to be amortized using the straight-line method over 10 years. The related amortization is included in the Amortization Expense shown on the Income Statement.

5. The opening UCC balances were $246,000 for Class 1, $135,000 for Class 8 and $90,000 for Class 10. The only fixed asset disposition during the year was the sale of a delivery truck. The truck had cost $35,000 and was sold for its net book value of $12,000. The only fixed asset acquisition was $52,000 in office furniture on April 1, 2018.

6. During 2018, RIL paid taxable dividends of $92,000. Of these dividends, $25,000 was designated as eligible. On September 1, 2018, RIL also elects to pay the maximum capital dividend allowable.

7. RIL allocates $60,000 of the annual business limit to OttawaFaux Inc. This is $5,000 more than OttawaFaux Inc. can utilize in 2018, but MI cannot use the excess.

8. RIL paid quarterly income tax instalments of $8,000 each on the 20th of March, June, September and December during 2018.

9. RIL has a website describing the products it carries, but no income is generated from the website.

Required: Prepare the federal corporate tax return for RIL for the 2017 taxation year using the ProFile T2 corporate software program. On the ProFile schedule titled "Info", the Filing question °Complete return from CIF1?" is answered Yes by default, click No. Ignore the GIFI requirements except as follows:

On GIFI Schedule 125:

• Input the total revenues less the Gain On Sale Of Shares ($685,000) on the line "Total Sales Of Goods And Service? (Code 8000).
• Choose 'Realized gains / losses on sale of investments' (Code 8211) from the drop down menu under Code 8089 and input the Gain On Sale Of Shares.
• Choose "Purchases / cost of materials' (Code 8320) from the drop down menu under Cost of Sales and input the Cost of Goods Sold.
• Choose °Amortization of tangible assets° (Code 8670) from the drop down menu under Operating Expenses and input the amortization expense.
• Choose "Other expenses" (Code 9270) from the drop down menu under Operating Expenses and Other Operating Expenses.
On GIFI Schedule 100:

• Input the Net Income figure as "Cash and deposits" (Code 1000) in order to make the total assets equal to the total liabilities and equity.
Although this will not properly complete the GIFI statements, it will eliminate the warning messages that would otherwise be generated when the Net Income figure and Amortization Expense are input on Schedule 1. These CIF! entries will have no effect on the calculations in the tax return.

In addition, to prevent audit warnings, 5141, "Notes Checklist", has to be completed. Assume there are no notes to the financial statements and answer "No" to any other relevant questions.