Question 49 (50 minutes) [Chapters 11, 12]
Manitoba Traders Ltd. is a Canadian-controlled private corporation located in Winnipeg,
Manitoba. For its fiscal year ended December 31, 2022, the corporation had correctly calculated
its income for tax purposes under Division B as follows:
Operating income (Note 1)
Profit on the sale of excess land (Note 2)
Royalty income (Note 3)
Interest on o/s accounts receivable in retailing business
Recapture of CCA (Note 4)
Advertising agency loss
Rental income (Note 5)
Taxable capital gains net of losses (from active assets)
Interest income from five-year bonds
Div from non-connected taxable Canadian corporations(eligible)
Foreign non-business income in Cdn. $ (Note 6)
Division B net income for tax purposes
This amount of operating income was computed correctly under Division B. The corporation
has permanent establishments in Manitoba and North Dakota in the United States. Its gross
revenue and salary and wages information is as follows:
Salaries and wages
The land had been held for approximately three years. It had been held vacant in order to
realize a profit on its sale at the right time.
The royalty income had been determined to be property income.
The recapture resulted from the sale of some fixtures used in the retailing business.
The rental income was derived from leasing the entire space on a five-year lease in an
Withholding tax on the pre-tax non-business income of $25,000 was C$5,000.