Solution 1

Landor Ltd.s Taxable Income would be calculated as follows: Net Income For Tax Purposes Net Capital Loss Carry Forward Deducted (All) Taxable Income Landor Ltd.s net federal Tax Payable would be calculated as follows: Base Amount Of Part I Tax [(38%)($218,250)] Federal Tax Abatement (Note One) Small Business Deduction (Note Two) Additional Refundable Tax On Investment Income (Note Three) Foreign Tax Credit On Business Income [(10%)($28,800)] Manufacturing And Processing Profits Deduction (Note Four) General Rate Reduction (Note Five) Part I Tax Payable Dividend Refund (Note Six) Net Federal Tax Payable $82,935 ( 19,643) ( 18,700) 400 ( 2,880) ( 4,221) ( 7,538) $30,353 ( 1,600) $28,753 $223,500 ( 5,250) $218,250

Note One The abatement is based on 90 percent [(88% + 92%) 2] of Landors income being taxed in a province. This gives a figure of $19,643 [(90%)(10%)($218,250)]. Note Two The small business deduction is 17 percent of the least of the following three amounts: 1. 2. 3. Canadian Active Business Income (Given) Taxable Income Deduct: [(3.7736)($2,880)] Business FTC Allocated Annual Business Limit (Given) $218,250 ( 10,868) $183,450 $207,382 $110,000

The least of these figures is the Companys $110,000 share of the annual business limit, resulting in a small business deduction of $18,700 [(17%)($110,000)]. Note Three The aggregate investment income of $6,000 is calculated as follows: Taxable Capital Gains Net Capital Loss Carry Forward Deducted Aggregate Investment Income The ITA 123.3 refundable tax (ART) is 6-2/3 percent of the lesser of: 1. 2. Aggregate Investment Income Taxable Income Deduct: Amount Eligible For The SBD $218,250 ( 110,000) $ 6,000 $108,250 $11,250 ( 5,250) $ 6,000

The ITA 123.3 tax on aggregate investment income is $400 [(6-2/3%)($6,000)].

Note Four The manufacturing and processing profits deduction would be 11.5 percent of the lesser of: 1. 2. M & P Profits (Given) Deduct: Amount Eligible For The SBD Taxable Income Deduct: Amount Eligible For The SBD [(3.7736)($2,880)] Foreign Business Tax Credit Aggregate Investment Income (Note Three) $146,700 ( 110,000) $218,250 ( 110,000) ( 10,868) ( 6,000) $36,700

$91,382

The lesser of these figures is $36,700, resulting in a manufacturing and processing profits deduction in the amount of $4,221 [(11.5%)($36,700)]. Note Five The general rate reduction is calculated as follows: Taxable Income Amount Eligible For The SBD Amount Eligible For The M&P Deduction Aggregate Investment Income (Note Three) Full Rate Taxable Income Rate General Rate Reduction $218,250 ( 110,000) ( 36,700) ( 6,000) $ 65,550 11.5% $ 7,538

Note Six The only addition to the RDTOH account for the year would be the refundable portion of Part I tax. This amount would be the least of three figures as follows: Aggregate Investment Income (Note Three) Rate Amount Under ITA 129(3)(a)(i) Taxable Income Deduct: Amount Eligible For Small Business Deduction [(3.7736)($2,880)] Foreign Business Tax Credit Balance Rate Amount Under ITA 129(3)(a)(ii) Amount Under ITA 129(3)(a)(iii) Part I Tax Payable $6,000 26-2/3% $1,600 $218,250 ( 110,000) ( 10,868) $ 97-382 26-2/3% $ 25,968 $30,353

The least of these three amounts would be $1,600 and this will be the balance in the RDTOH account, given that the RDTOH balance at the end of the preceding year was nil. The dividend refund for the year would be $1,600, the lesser of: One-third of taxable dividends paid ($46,000/3) = $15,333 RDTOH balance - December 31, 2011 = $1,600

Solution 2
Part A - Minimum Net Income For Tax Purposes MSLs minimum Net Income For Tax Purposes would be calculated as follows:

Accounting Income Before Taxes Add: Amortization Taxable Capital Gain [(1/2)($132,000-$109,000)] Deduct: CCA Accounting Gain On Depreciable Asset Net Income For Tax Purposes

$213,000 $126,000 11,500 ($138,000) ( 27,000) 137,500

( 165,000) $185,500

Part B - Minimum Taxable Income MSLs minimum Taxable Income would be calculated as follows: Net Income For Tax Purposes Dividends Received From Taxable Canadian Corporations Net Capital Loss Carry Forward* Non-Capital Loss Carry Forward (All) Taxable Income $185,500 ( 12,000) ( 11,500) ( 126,000) $ 36,000

*Limited to the amount of taxable capital gains included in Net Income For Tax Purposes. This deduction leaves a net capital loss carry forward of $11,000 ($22,500 - $11,500).

Solution 3
The required calculation of the maximum CCA is as follows: Class 3 $263,000 Nil Nil Nil $263,000 5% $ 13,150 Class 8 $72,000 Nil Nil Nil $72,000 20% $14,400 Class 10 $52,000 38,000 ( 23,000) ( 7,500) $59,500 30% $17,850

Opening Balance Additions Proceeds Of Disposition One-Half Net Additions CCA Base CCA Rate Maximum CCA

This gives a maximum amount for CCA of $45,400 for the taxation year.