EFG Corporation ("EFG") is a Canadian-controlled private corporation and has correctly calculated its net income for tax purposes to be $857,000 for the year ending December 31, 2019, as shown below: Business income $710,000 Taxable capital gains $80,000 Taxable dividends from Canadian public corporations $32,000 Taxable dividends from XYZ Inc. $5,000 Interest on five-year bonds $30,000 Net income for tax purposes $857,000 EFG owns 100% of the shares of XYZ. For the current year, XYZ claimed the small-business deduction on $80,000 of its active business income. Additional information: • EFG made charitable donations of $45,000 during the year • Net capital losses were $35,000 as of January 1, 2019
EFG Corporation ("EFG") is a Canadian-controlled private corporation and has correctly calculated its net income for tax purposes to be $857,000 for the year ending December 31, 2019, as shown below:
Business income $710,000
Taxable
Taxable dividends from Canadian public corporations $32,000
Taxable dividends from XYZ Inc. $5,000
Interest on five-year bonds $30,000
Net income for tax purposes $857,000
EFG owns 100% of the shares of XYZ. For the current year, XYZ claimed the small-business deduction on $80,000 of its active business income.
Additional information:
• EFG made charitable donations of $45,000 during the year
• Net capital losses were $35,000 as of January 1, 2019
• Non-capital losses were $50,000 as of January 1, 2019
• At the end of the previous year, EFG had a balance in its non-eligible refundable dividend tax on hand (RDTOH) account of $18,000 and GRIP of $2,000. XYZ received a dividend refund of $1,917 from its non-eligible RDTOH when it paid its dividend of $5,000 to EFG.
• EFG calculated a dividend refund of $3,000 for the previous year, based on dividends paid in the previous year.
• Eligible dividends of $90,000 and capital dividends of $70,000 were paid by EFG on December 31, 2019. Dividends equal to the GRIP balance were designated as eligible dividends.
• For 2018, the taxable capital of EFG and XYZ, combined, was below $10,000,000. As well, the combined adjusted aggregate investment income was below $50,000.
Needed:
1. Determine EFG's federal income tax payable for its 2019 fiscal year (Hint: Start with Federal Tax (@38% of taxable income), Less other items.
2. Determine EFG's refundable dividend tax on hand balances at the end of 2019.
3. Determine EFG's dividend refund for 2019.
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