Problem
Revolution Inc. is a public corporation. Its head office is located in Calgary and it has a branch (permanent establishment) in Los Angeles, California. It has a December 31 year end.
During the 2021 taxation year, the Company's Net Income For Tax Purposes and Taxable Income amount to $225,000. This amount includes $35,000 (Canadian) that was earned by the branch operating in the United States. The $35,000 earned by this branch is before the deduction of any U.S. or Canadian income taxes and represents business income. As a result of earning this amount in the United States, the Company was required to pay $10,000 (Canadian) in U.S. income taxes.
For purposes of calculating the federal tax abatement, assume that applying the ITR 402(3) formula results in 95 percent of the Company's Taxable Income being allocated to Canadian provinces.
Task
Calculate Revolution's federal Tax Payable for the 2021 taxation year. Assume the foreign business income tax credit is equal to the foreign tax withheld.