SSS Solution Twelve - 5 Part A - Net Income For Tax Purposes The minimum Net Income For Tax Purposes would be calculated as follow: Accounting Income $527,000 Add: mo rtization Expense $127,000 Taxable Capital Gain On Building [(1/2($423,000 - $373,000)) See Note 25,000 Recapture ($373,000 - $290,000) 83,000 Gain/Loss On Land ($100,000 - $100,000) Nil Charitable Donations 8,500 Business Meals And Entertainment ((1/2)(518,000)} 9,000 Foreign Taxes Withheld 7,500 260,000 Deduct: ‘Maximum CCA ($143,000) Accounting Gain On Building (113,000) (256,000) Part B - Taxable Income The minimum Taxable Income would be calculated as follows: Net Income For Tax Purposes $531,000 Dividends Received ( Current Charitable Donations ( Charitable Donations Carry Forward (All) (12,000) Non-Capital Loss Carry Forward (All) ( Net Capital Loss Carry Forward" ( Taxable Income, “While theres net capital loss carry forward of $31,000, the deduction is limited to $25,000, the taxable gain that was recognized during the current year. This leaves a net capital loss carry forward of $6,000 ($3 1,000 - $25,000). Part C - Tax Payable The minimum federal Part | Tax Payable is as follows: Base Amount Of Part I Tax {(389%4)($426,500)] $162,070 Federal Tax Abatement [(10%](90%)($426,500)] (Note One) (38,385) ‘Small Business Deduction (Note Two) (75,335) M&P Deduction (Note Three) Nil General Rate Reduction (Note Four) (3,900) Foreign Business Tax Credit (Given) (7,500)Note One Foreign revenues are equal to 20 percent of total revenues ($375,000 + $1,875,000). Foreign wages and salary are nil. This gives an average percentage for the foreign income allocation of 10 percent, withthe remaining90 percent, being allocated to the two provinces. Note Two The amount eligible for the small business deduction would be based on the least of the following amounts: Canadian Source Active Business Income (Given) $436,375 Taxable Income $426,500 Less: 4 Times The Foreign Business Tax Credit ((4)($7,500)]) (30,000) Annual Business Li it $500,000 The least of these figuresis $396,500, resul (19%)($396,500)1 yess deduction of $75,335 Note Three The base for the M&P deduction would be nil, the lesser of: M & P Profits (Given) $310,000 Less: Amount Eligible For The Small Business Deduction (396,500) Bal Ni Taxable Income $426,500 Less: Amount Eligible For The Small Business Deduction ( 396,500) 4 Times The Foreign Business Tax Credit [(4)($7,500)]_ (30,000) NY Aggregate Investment Income ($25,000 - $25,000) Adjusted Taxable Income. Ni Note Four The general rate reduction would be calculated as follows: Taxable Income $426,500 Amount Eligible For The Small Business Deduction ( 396,500) Amount Eligible For The M&P Deduction Nil Full Rate Taxable Income $ 30,000 Rate 13% General Rate Reduction $3,900