Question

Rocky Mountains Limited (RML) is a Canadian public company that sells hiking and outdoors equipment. Its controller provided you with the following information related to its 2019 tax year ended December 31:

Income from operations, including $100,000 earned in U.S. operations (net/after reduction of $20,000 U.S. tax withheld) (both total and US portion are net)	$300,000
Canadian investment royalty income	15,000
U.K. non foreign affiliate dividend income (before deducting $5,000 of tax withheld)	25,000
Taxable dividend received from non-connected Canadian corporations	10,000
Capital gains	12,000
Charitable donations	$290,000
Unused foreign tax credit in respect of U.S.	$4,000
Net capital losses that were incurred in 1995 (not yet used)	$15,000
Non capital losses that were incurred in 2013 (not yet used)	$3,000
Non capital losses that were incurred in 1995 (not yet used)	$8,000

RML’s controller pays her own personal taxes at the marginal rate of 26%, as she personally earns between $95,259 and $147,667 annually.

RML has permanent establishments in the United States, British Columbia, and Alberta. Its gross revenues and salaries and wages data have been allocated as follows:

	British Columbia	Alberta	United States
Gross Revenues	$4,000,000	$3,000,000	$3,000,000
Salaries and wages	$500,000	$300,000	$200,000

Gross revenues exclude income from property not used in connection with the principal business operation of the corporation.

Please calculate the total federal tax payable by the corporation for the 2019 taxation year, considering any tax credits potentially available, as well. Show all calculations. You do not need to reference the handbook.

Answer 1

Particular				Income (A)	Expense (B)
Income from operations, including $100,000 earned in U.S. operations (net/after reduction of $20,000 U.S. tax withheld)	$              3,00,000
Canadian investment royalty income				$                  15,000
U.K. non foreign affiliate dividend income (before deducting $5,000 of tax withheld)	$                  25,000
Taxable dividend received from non-connected Canadian corporations				$                  10,000
Capital gains				$                  12,000
Charitable donations					$                      2,90,000
Unused foreign tax credit in respect of U.S.					$                            4,000
Net capital losses that were incurred in 1995 (not yet used)					$                          15,000
Non capital losses that were incurred in 2013 (not yet used)					$                            3,000
Non capital losses that were incurred in 1995 (not yet used)					$                            8,000
	British Columbia	Alberta	United States
Gross Revenues	$       40,00,000	$      30,00,000	$      30,00,000	$        1,00,00,000
Salaries and wages	$         5,00,000	$        3,00,000	$        2,00,000		$                    10,00,000
	Total			$        1,03,62,000	$                    13,20,000
	Taxable Income = A-B			$                                                         90,42,000
	Federal Tax Rate @ 24%				24%
Ans:	Total federal tax payable by the corporation in 2019				$          21,70,080