Newz IncIs a Canadian-Controlled Private Corporation with a December 31 Year-End

question 4

Essay

Newz Inc.is a Canadian-controlled private corporation with a December 31 year-end and the controller has asked you to prepare the 2020 T2 tax return.The company reported a net income of $200,000 on its financial statements in 2020.Of this amount, $15,000 was from non-eligible dividend income received from a taxable Canadian corporation.The remaining income was from active business.
Additional information:
1) The non-eligible dividends were received from Snappy Ltd., a connected Canadian-controlled private corporation.Snappy has only one class of shares, and the total amount of non-eligible dividends paid in 2020 was $50,000 which resulted in a non-eligible dividend refund of $9,000.
2) Newz had a balance in its non-eligible RDTOH account of $3,000 at the end of 2019.The company did not receive a dividend refund in 2019.
3) Newz is associated with Golden Co.Golden used $220,000 of the small business deduction limit on its 2020 tax return.
4) Newz' 2020 financial net income includes a donation expense of $1,000.
5) Amortization of $30,000 was expensed on Newz income statement in 2020.CCA has been correctly calculated at $28,500 for 2020 and has not been transferred from the tax accounts to the financial statements.Newz utilizes the maximum CCA deduction each year.
6) Newz paid non-eligible dividends totaling $5,000 during 2020.
(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.)
A.Determine Newz's net income for tax purposes.
B.Determine Newz's taxable income.
C.Determine the small-business deduction for Newz.In your answer, identify the values for
1) active business income
2) taxable income
3) annual limit.
D.Calculate Newz's
1) Part IV tax on non-eligible dividends
2) dividend refund from non-eligible RDTOH, if applicable.
(Round all amounts to zero decimal places.Work must be shown for marks to be awarded.)

---

Definitions:

Cross-price Elasticity

A gauge of the reaction in the amount of one product demanded when there's a price change in another product.

Substitutes

Goods or services that can be used in place of each other, where the increase in the price of one leads to an increase in the demand for the other.

Demand Elasticity

The degree to which the quantity demanded of a good or service changes in response to a change in its price.

Labor Supply Curve

A graphical representation showing the relationship between the amount of labor workers are willing to offer and the wage rate.