Question

ABC Ltd. is a Canadian controlled private corporation. The company began operations in 2017 and uses December 31 as a year end. The income (loss) before taxes, calculated using GAAP and the amounts included in the GAAP income figures, for the years 2017 through 2018 are as follows 2017 2018 $ Income (Loss) before taxes (GAAP) Charitable Donations(included in GAAP) Accounting gains (losses ) on Land in GAAP Dividends from Taxable canadian Corps (included in gaap) (2.000) $ 4,000 (3,000) 12,000 10,000 2,500 2,000 8,000 Accounting gains/losses are equal to the capital gains / losses Policy is to deduct charitable donations before using any loss carry overs They also have a policy of minimizing any capital loss carry overs before non capital loss carry overs (use capital losses first) Calculate the minimum net Income For Tax purposes and Taxable income that would be reported for ABC Ltd. for each of the years under consideration Provide an analysis of the amount and type of carry overs that would be available at the end of each of the years

Answer 1

Calculation of ABC Ltd Minimum net income for tax purposes and taxable income
				2017	2018
			Income(Loss) before taxes	-2000	10000
			Less: Capital gains/losses which
			are taxable under other heads of
			Income	-3000	2000
				1000	8000
			Less: Charitable donations received	4000	2500
				-3000	5500
			Less: Dividends received from taxable
			canadian corps	12000	8000
			Income from Business or Profession	-15000	-2500
			Income from Capital gains on which special	-3000	2000
			rates apply
			Dividend Income on which special rates apply	12000	8000
			Minimum net income for tax purposes	-6000	7500
			Less: set off of carry forward of capital gains losses		2000
					5500
			Less: set off of carry forward of non capital losses		5000
			Taxable Income		500