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14 Cards in this Set
- Front
- Back
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Additions to net income |
- current and deferred/future taxes - interest and penalties on late taxes - amortization - recapture of CCA - accounting losses on disposal of assets - taxable capital gains - charitable donations over $100 - political donations - reserves and contingent liabilities (warranties, pensions) - meals and entertainment (50%) - club dues/ rec fees - equity losses on equity investments - dividends received on equity investments - asset write-downs - foreign advertising - illegal payments/fines - personal expenses - life insurance where corporation is beneficiary - bad debt reserve |
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Deductions from net income |
- CCA - terminal losses - accounting gain on disposal of assets - allowable capital losses - research and development costs - pension contributions - warranty expenditures - allowable business investment losses - landscaping - equity income on equity investments - amortization of premium on debt |
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Terminal loss |
Lesser of cost and proceeds < UCC and last asset in class |
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Recapture |
Lesser of costs/proceeds > UCC of class |
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Net income for tax purposes - net income with standard additions/deductions |
Taxable income - net income for tax purposes with deductions for: - NCL - net capital losses (50% of capital loss) - home relocation - eligible dividends from non-connected Canadian corporation (held for sale investments) - dividends paid to shareholders |
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Employment income |
Inclusions: - salary/wages - bonuses, commissions, tips - automobile standby charge - private insurance premiums
Deductions: - dues to professional organizations - home office expenses |
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Division C Deductions |
Corporate: - dividends from CCPC (included in NITP) - donations (limited to 75% of net income - included in NITP) - net capital losses - non-capital losses
Personal - guaranteed income supplement, social assistance, worker's compensation (also included in NITP) - loss carryovers (NCL, net capital losses, ABIL, restricted farm losses) - lifetime capital gains deduction - Northern residents deduction |
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Non-Capital Losses |
- carried back 3 years/forward 20 years - if loss is ABIL (capital loss from disposal of shares or debt instruments in a small business corporation) -> can be carried back 3 years/forward 10 years and applied to any kind of income |
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Net capital losses |
- carried back 3 years/forward indefinitely - no capital losses on depreciable assets because they already have CCA |
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Deferred taxes |
Common items: - warranty liability - capital leases - asset retirement obligation - PPE (difference between balance sheet amount and UCC) - deferred development costs - temporary investments (add 1/2 excess FMV over cost to cost) - lawsuit
Certain liabilities that are set up for future events represent future taxes to be paid, therefore must have a corresponding deferred tax assets.
Assets create deferred tax liabilities and liabilities created deferred tax assets.
Adjust account to actual every year Considered long-term |
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Dividends |
Eligible: paid by public companies and CCPCs not eligible for the small business deduction Non-eligible: paid by CCPCs eligible for the SBD Corporations: - include in NITP and deduct as division C Individuals: - include dividend and gross-up (taxable divided) in income and receive dividend tax credit based on whether dividend was eligible or non-eligible |
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Tax planning |
Benefits of incorporation: - tax reduction (important if eligible for SBD) - tax deferral (pay dividends at any time) - income splitting (issue separate classes of shares so that dividends can be declared for lower income shareholders and not the higher income shareholder OR pay salary of company is not corporation) Kiddie tax: if dividends paid to child under 18 they are taxed at highest personal tax rate and cannot claim basic personal tax credit |
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Aggregate investment income |
- interest - net rental income - royalties - dividends - net taxable capital gains *Division C deductions available for dividends and taxable capital gains |
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Corporate taxes payable |
CCPC (+) Basic federal tax - general corporate tax rate 38% (-) Federal abatement - 10% (-) Small business deduction - 17.5% up to $500,000 (-) Manufacturing and processing profits deduction - 13% (-) General rate reduction - 13% of full rate taxable income (that haven't been reduced by SBD or M&P deduction) (+) Additional refundable tax (-) Foreign tax credits (claimed if foreign business income included in taxable income) (-) Investment tax credits = FEDERAL PART I TAX (+) Provincial tax - determined by where establishment is located on revenue earned (+) PART IV TAX PAYABLE (refundable) - 38 1/3% on dividends received from non-connected corporations + investor's share of dividend refund from connected corporation |
