Problem - Ontario Ltd., a CCPC, is a landscaping supplies wholesaler. The Income Statement for the year ended December 31, 2013, reported a net income before tax of $279,141. You have been retained to determine the corporation's income tax liability and minimum net federal taxes payable. You have gathered the following information relating to specific income and expense items included in the income statement to arrive at the net income before tax for 2013: Legal expenses1 $ 3,000 Depreciation 46,000 Interest income 27,660 Taxable dividend received Feb 12,2013 from a non-connected company 1,300 Gain on sale of furniture2 35,000 You are also given the following additional information: CCA available to Ontario for the year 96,800 Non-capital loss carry forward (from 2011) 62,000 Charitable donations (carried forward from 2010) 3,000 Net capital loss (from 1999) 2,500 Dividends paid - August 15, 2013 50,000 Opening balance - RDTOH account 1,500
1. Legal expenses include $2,875 for negotiating and drafting a security agreement for a bank loan, and $125 for filing the annual corporate return.
2. The book gain is a result of a sale of the company's office furniture for $50,000 under Class 8. Class 8 has an undepreciated capital cost of $46,000 as at January 1, 2013. The furniture originally cost $130,000. Ontario Ltd. is now using leased furniture.
Required
a. For the taxation year ended December 31, 2013, compute Ontario Ltd.'s i. Net income for tax purposes (6.5 marks) ii. Taxable income
b. Compute Ontario Ltd.'s minimum net federal tax payable for 2013. To obtain maximum marks, you must show all calculations including any adjustments required to calculate active business income.