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) $ 387,000 Profit on the sale of excess land (Note 2) 305,000 Royalty income (Note 3) 15,000 Retailing income 210,000 Interest on o/s accounts receivable in retailing business 14,500 Recapture of CCA (Note 4) 30,500 Advertising agency loss (53,500) Rental income (Note 5) 36,500 Taxable capital gains net of losses (from active assets) 63,000 Interest income from five-year bonds 10.000 Div from non-connected taxable Canadian corporations(eligible) 9,000 Foreign non-business income in Cdn. $ (Note 6) 25,000 Division B net income for tax purposes $ 1,052.000 Notes: (1) 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: Manitoba North Dakota Gross revenue $10,325,000 $3,675,000 Salaries and wages 5,375,000 993,000 (2) 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. (3) The royalty income had been determined to be property income. (4) The recapture resulted from the sale of some fixtures used in the retailing business. (5) The rental income was derived from leasing the entire space on a five-year lease in an unused warehouse. (6) Withholding tax on the pre-tax non-business income of $25,000 was C$5,000.
Additional information: (a) Manitoba Traders Ltd. made the following selected payment during the year: Charitable donations $12,500 (b) Four quarterly dividends (non-eligible) of $45,000 were declared at the end of each calendar quarter of 2022 and paid within two weeks of their declaration. The last quarter of 2022 was paid in January 2023 and a dividend (non-eligible) of $30,000 declared in the last quarter of 2021 was paid in January 2022. (c) Manitoba Traders Ltd. had allocated $50,000 of its business limit to other associated corporations. Taxable capital of the associated group for large corporations tax purposes was $11,000,000. (d) The balance in the tax accounts on January 1, 2022 were: Charitable donation carryforward $ 15,500 Unused business foreign tax credit 14,000 Non-capital losses from 2016 46,500 Net capital losses from 2017 14,500 Refundable dividend tax on hand (non-eligible) 20,000 Dividend refund for 2021 (non-eligible) 18,000 Required: (A) Compute the federal Part I tax and provincial tax at a 17% rate for Manitoba on federal taxable income payable by the corporation for 2022. Show in detail the calculation of all tax deductions in the computation, using a separate schedule for each special tax deduction. Assume that the current year's passive income is equal to the prior year's passive income. ( 52 minutes ) (B) Compute the refundable tax on hand balance as at December 31, 2022, showing in detail your calculation and compute the dividend refund for 2022. ( 15 minutes )
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