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Problem 12-10 Solution

The document summarizes the calculation of net income for tax purposes. It starts with accounting net income of $1,115,050 and lists additions of $858,142 and deductions of $951,575 to arrive at a net income for tax purposes of $1,021,617. It then lists additional deductions to calculate taxable income of $860,700.

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KELLY DANG
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61 views9 pages

Problem 12-10 Solution

The document summarizes the calculation of net income for tax purposes. It starts with accounting net income of $1,115,050 and lists additions of $858,142 and deductions of $951,575 to arrive at a net income for tax purposes of $1,021,617. It then lists additional deductions to calculate taxable income of $860,700.

Uploaded by

KELLY DANG
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Net Income for Tax

Accounting Net Income before Tax $ 1,115,050

Additions:
Amortization $ 405,525
Taxable Capital Gain on sale of Old Building $ 25,000
Taxable Capital Gain on sale of Land $ 12,500
TCG on Vacant Land $ 15,917
Recapture on Sale of Building $ 250,000
Accounting Loss on Sale of Vehicles $ 63,000

Foreign Taxes Withheld $ 2,700


Articles of Incorporation Legal Costs $ 21,000
Bond Discount Amortization $ 4,600
Donations $ 12,500
Interest on late income tax payments $ 1,400
half of meals and entertainment $ 21,000
Golf membership fees $ 23,000
Total Additions $ 858,142

Deductions:
Accounting Gain on Sale of Building $ (175,000)
Terminal Loss on Sale of Vehicles $ (20,000)
CCA $ (628,575)
Accounting Gain on Sale of Vacant Land $ (75,000)
Landscaping Costs $ (53,000)
Total Deductions $ (951,575)
Net Income For Tax Purposes $ 1,021,617
Reserve on Sale of Vacant Land
(note #1) 1 43,165
(note #2) 2 60000
(note #2)

(note #2) Lesser of (1 and 2):


(note #2) 43,165
(note #3) Pro rate gain, since not everything received in same period =>
(note #6) Gain on Vacant Land
(note #7) 31,835
(note #8) not a deductible expense for taxes
(note #8) we do this later Taxable gain (50%)
(note #8) Apparently municpal are deductible but provincial and federal arent
(note #9)
(note #9)

(note #2)
(note #2)
(note #2)
(note #3)
(note #4) Accounting Captalized, but for taxes its an expense
rve on Sale of Vacant Land
gain * (unpaid amount that will be paid in future / total sale price)

er of (1 and 2):

on Vacant Land
(gain - lesser of)

ble gain (50%)


Taxable Income

Net Income for Tax $ 1,021,617

Donations $ (12,500)
Dividends from taxable Canadian Corporations $ -
Net Capital Losses Carryforward $ (53,417)
Non-Capital Losses Carryforward $ (95,000) <-

$ 860,700
Net Capital Losses 210000
limited to current year capital Gains 37500
New Net Capital Loss 172500

no limit on this, since we have much higher income


Net Income for Tax 1,021,618
Charitable Donations (12,500)
Net Capital Loss (53,418)
Non-Capital Loss (95,000)

Taxable Income 860,700

Part I
Base Amount 327,066 38%
Abatement (75,742) 10% 88%
Small Business Deduc (33,250) 19%
ART - 10.67%
M&P Profit Deduction (32,500) 13.00%
General Rate Reducti (56,641) 13.00%
Foreign Bus Tax Credi (2,700)
Part I Tax Payable 126,233
Active Business Income 976,380 AII
Tax Capital Gains 53,418
Net Capital Loss (53,418)
-
Small Busines Deduction 175,000
1 ABI 976,380
2 ATI 849,900
3 ABL 175,000

M&P Deduction 250,000


1 Adj M&P Profits 250,000
2 Adj TI 674,900

General Rate Reduction


Full Rate TI 435,700
Class 1 (old) Class 1 (new) Class 8 Class 10 Class 13
Opening UCC Balance $ 1,050,000 $ - $ 1,460,000 $ 142,000 $ 175,000

Additions - 1,700,000 150,000 - -

Dispositions: 1,300,000 - - 122,000 -


Cost 1,300,000 - - 285,000 -
Proceeds 1,350,000 - - 122,000 -

1/2 YR
ACCII - 850,000 75,000 -

CCA Base (250,000) 2,550,000 1,685,000 20,000 175,000

CCA Rate 0 10% 20% 30%

CCA - 255,000 337,000 - 35,000


Adjusted ACCII (850,000) (75,000)

Ending UCC Balance - 1,445,000 1,273,000 - 140,000

Terminal Loss (20,000)


Recapture 250,000

2013 250,000
2017 60,000
Class 14.1 Total
$ -

21,000

-
-
-

10,500

31,500

5%

1,575 628,575
(10,500)

19,425

(20,000)
250,000

10 25,000
6 10,000

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