Problem
Brenda Co. reported a net income for tax purposes of $800,000 in 2021. (Brenda is a Canadian controlled private corporation that operates in a province which has a provincial tax reduction on income earned from manufacturing and processing.)
During 2021, Brenda:
• made a contribution of $25,000 to eligible charities;
• received $30,000 in non-eligible dividends from a connected taxable Canadian corporation;
• recognized manufacturing and processing profits of $250,000; and
• had active business income of $770,000.
Additional information:
1. For tax purposes, Brenda is associated with Hot Co. Hot used $310,000 of the small business deduction for its active business income in 2021.
2. The non-eligible dividends were received from Sugar Co. Brenda owns 20% of Sugar. Sugar received a dividend refund of $20,000 as a result of paying taxable dividends.
3. The ending balances in Brenda's GRIP and non-eligible RDTOH (NERDTOH) accounts were nil in the previous year.
(None of the above is subject to rules pertaining to specified corporate income, excessive income from passive investments, or taxable capital in excess of $10 million.)
Task
Calculate the following federal amounts for 2021:
• Brenda's taxable income
• Brenda's small business deduction
• The M & P deduction available to Brenda
• Brenda's general rate reduction
• Part IV tax on non-eligible dividends
• The balance in Brenda's GRIP account at the end of 2021