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Chapter 12

BUS 329 Chapter Notes - Chapter 12: Net Income, Corporate Tax, Welfare


Department
Business Administration
Course Code
BUS 329
Professor
Susan Bubra
Chapter
12

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Chapter 12
Taxable Income and Tax Payable for Corporations
Computation of Net Income (Schedule 1)
Accounting net income
xxx
- Additions
xxx
- Deductions
(xxx)
Net income for tax purposes
xxx
Less: Division C deductions
(xxx)
Taxable income
xxx
Corporate Taxable Income
- Deductions not available to corporations
o Lifetime capital gains deduction
o Employee stock option deduction
o Home relocation loan deduction
o Lump-sum payments
o Northern residents deductions
o Social assistace ad worker’s copesatio
- Deductions available to corporations
o Losses same as for individuals
o Charitable donations
Accounting stage deduct
Reconciliation stage add
Division C deduct again
A deduction rather than a credit
o Dividends
Unique to corporations
Taxable Canadian dividends
Dividends
- Corporate tax rate is 30%
- When the dividends are moved to other corporation, it will charged again for 30%
- Problem is that the 51% is not consistent with integration
o Solution
Allow corporations to deduct dividends received from other taxable Canadian
corporations
Foreign dividends would not get removed
Foreign Source Dividends Received
- Not deductible (not division C deduction)
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- Included in income pre-withholding amount
- A credit against tax payable becomes available
Non-Capital Loss Carry Overs
- Income
o Bond interest
o Dividends
o Taxable capital gains
- Losses
o Business losses
o ABIL
o Taxable capital gains
Ordering of Taxable Income Deductions
- Timing
o Oldest must be used before others of same type
o No other restrictions on order
- Constraints
o Restricted by income type only (net capital)
o Restricted by time only (non-capital)
o Restricted by time and income (restricted farm)
Geographical Allocation of Corporate Income
- Permanent establishment ITR 400(2)
o Fixed place of businesses
o Stock of inventories, land and equipment
o Activity
Gross revenues
Salaries and wages
- Procedures
o Simple average
Example
- Gross Revenues
Province
Amount
Percent
Alberta
$250,000
25%
Manitoba
400,000
40%
Ontario
350,000
35%
Total
$1,000,000
100%
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