Maxitech is a Canadian company. It has always used a December 31 year end. On January 1, 2016, the company had the following carry forward balances:
- Net Capital Losses 75,600
- Non-Capital Losses 51,400
- Unused Charitable Donations 4,600
During the 2016 taxation year, Maxitech's records show the following results (all amounts are based on the relevant tax rules):
- Net Business Loss 142,000
- Taxable Capital Gains 21,400
- Allowable Capital Losses 6,500
- Charitable Donations 3,200
- Dividends from Taxable Canadian Corporations 30,400
Required: Calculate the Corporation's minimum net income for tax purposes and taxable income for it's 2016 taxation year. Indicate any balances available for carry forward to subsequent years under each of the following assumptions:
A. It is the policy of the company to minimize net capital loss balances prior to using any other type of carry over balance.
B. It is the policy of the company to minimize non-capital losses prior to using any other type of carry over balance.
Maxitech is a Canadian company. It has always used a December 31 year end. On January 1, 2016, the company had the following carry forward balances:
- Net Capital Losses 75,600
- Non-Capital Losses 51,400
- Unused Charitable Donations 4,600
During the 2016 taxation year, Maxitech's records show the following results (all amounts are based on the relevant tax rules):
- Net Business Loss 142,000
- Taxable Capital Gains 21,400
- Allowable Capital Losses 6,500
- Charitable Donations 3,200
- Dividends from Taxable Canadian Corporations 30,400
Required: Calculate the Corporation's minimum net income for tax purposes and taxable income for it's 2016 taxation year. Indicate any balances available for carry forward to subsequent years under each of the following assumptions:
A. It is the policy of the company to minimize net capital loss balances prior to using any other type of carry over balance.
B. It is the policy of the company to minimize non-capital losses prior to using any other type of carry over balance.
Related questions
Gray, Stone, and Lawson open an accounting practice on January 1, 2016, in San Diego, California, to be operated as a partnership. Gray and Stone will serve as the senior partners because of their years of experience. To establish the business, Gray, Stone, and Lawson contribute cash and other properties valued at $240,000, $210,000, and $105,000, respectively. An articles of partnership agreement is drawn up. It has the following stipulations:
Personal drawings are allowed annually up to an amount equal to 10 percent of the beginning capital balance for the year.
Profits and losses are allocated according to the following plan:
A salary allowance is credited to each partner in an amount equal to $8 per billable hour worked by that individual during the year.
Interest is credited to the partnersâ capital accounts at the rate of 12 percent of the average monthly balance for the year (computed without regard for current income or drawings).
An annual bonus is to be credited to Gray and Stone. Each bonus is to be 10 percent of net income after subtracting the bonus, the salary allowance, and the interest. Also included in the agreement is the provision that there will be no bonus if there is a net loss or if salary and interest result in a negative remainder of net income to be distributed.
Any remaining partnership profit or loss is to be divided evenly among all partners.
Because of financial shortfalls encountered in getting the business started, Gray invests an additional $9,500 on May 1, 2016. On January 1, 2017, the partners allow Monet to buy into the partnership. Monet contributes cash directly to the business in an amount equal to a 20 percent interest in the book value of the partnership property subsequent to this contribution. The partnership agreement as to splitting profits and losses is not altered upon Monetâs entrance into the firm; the general provisions continue to be applicable.
The billable hours for the partners during the first three years of operation follow:
| 2016 | 2017 | 2018 | |
| Gray | 1,740 | 2,100 | 1,910 |
| Stone | 1,470 | 1,200 | 1,650 |
| Lawson | 1,600 | 1,410 | 1,340 |
| Monet | 0 | 1,220 | 1,610 |
The partnership reports net income for 2016 through 2018 as follows:
| 2016 | $ | 69,000 |
| 2017 | (23,400) | |
| 2018 | 160,000 | |
Each partner withdraws the maximum allowable amount each year.
Determine the allocation of income for each of these three years.
Prepare in appropriate form a statement of partnersâ capital for the year ending December 31, 2018.
Determine the allocation of income for 2016. (Loss amounts should be indicated with a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar amounts.)
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Determine the allocation of income for 2017. (Loss amounts should be indicated with a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar amounts.)
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Determine the allocation of income for 2018. (Do not round intermediate calculations. Round your answers to the nearest dollar amounts.)
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Prepare in appropriate form a statement of partnersâ capital for the year ending December 31, 2018. (Amounts to be deducted should be indicated with minus sign. Do not round intermediate calculations. Round your answers to nearest dollar amounts.)
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