Alpha Ltd Is a Canadian-Controlled Private Corporation Operating a Small

question 4

Essay

Alpha Ltd. is a Canadian-controlled private corporation operating a small
land-development business. In June 20X2, the company acquired a license to manufacture pre-fab homes and began operations immediately. Financial
information for the 20X2 taxation year is outlined below:
Alpha's profit before income taxes for the year ended November 30, 20X2, was
$245,000, as follows:
The loss on sale of property results from two transactions. On October 1, 20X2,
Alpha sold all of its shares of Q Ltd., a 100% subsidiary, for $100,000. (The
shares were acquired seven years ago for $80,000.) Also, during the year, Alpha sold some of its vehicles for $25,000.The vehicles originally cost $50,000 and had a book value of $48,000 at the time of sale. New vehicles were obtained
under a lease arrangement.
The 20X1 corporate tax return shows the following UCC balances:
Alpha occupies leased premises under a seven-year lease agreement that began three years ago. At the time, Alpha spent $60,000 to improve the premises. The lease agreement gives Alpha the option to renew the lease for two three-year periods. Alpha began manufacturing pre-fab homes on June 1, 20X2. At that
time, it acquired the following:
Accounting amortization in 20X2 amounted to $60,000.
Alpha normally acquires raw land, which it then develops into building lots for resale to individuals or housing contractors. In 20X2, it sold part of its
undeveloped land inventory to another developer for $400,000. The sale realized a profit of $80,000, which is included in the land-development income above.
The proceeds consisted of $40,000 in cash, with the balance payable in five annual installments beginning in 20X3.
Travel and entertainment expense includes the following:
Legal and accounting expense includes the following:
Required:
Calculate Alpha's net income for tax purposes for the 20X2 taxation year. (Assume a 2016 tax year.)

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Definitions:

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