# Chapter 11 - Computation of Taxable Income and Tax

## Full text

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### Computation of Taxable Income and Tax

I.TAXABLEINCOME OF A CORPORATION:

Certain deductions are allowed by the ITA under Division C to deduct from Division B income to compute taxable income of a taxpayer. The following table displays such deductions.

Division C deductions

Provisions Deductions Individual Corporation

110.1(d), (d.1) Stock options Deduction

110(1)(f) Social assistance payment Deduction

110(1)(j) Home relocation Loan Deduction

110.1(1)(b) Gift to Her majesty Credit Deduction

110.1(1)(c) Gift of cultural property to

Institution Credit Deduction

110.2 Lum-sum payment Deduction

110.6 Capital gain Deduction Deduction

111(1)(a) Non-Capital losses Deduction Deduction

111(1)(b) Net Capital Losses Deduction Deduction

111(1)(c) Restricted Farm Losses Deduction Deduction

111(1)(d) Farm Losses Deduction Deduction

111(1)(e) Limited Partnership losses Deduction Deduction

Corporation Deduction

113 Dividend from foreign

affiliate Deduction

We have studied how the Division B income is computed according to the source of income. The taxable income is computed in the next step as follows:

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Source of Income:

Employment Income xxx

Property income xxx

Capital gain & loss xxx

Other income xxx Other deduction xxx Division B Income XXX Division C Deduction: Taxable Dividend xxx Charitable Donation xxx

Loss Carry over xxx XXX

Taxable Income XXX

1.Taxable Dividend: ITA 112

A dividend included in the Division B income is deductible in computing its taxable income. To be deductible under Division C, the dividend must be from:

2. Taxable subsidiary corporation resident in Canada,

3. Non-resident corporation carrying on a business in Canada, and 4. Dividend from foreign affiliate.

The purpose of the deduction is to prevent double taxation of corporate income, since the dividend is paid from retained earning, after tax amount.

2.Charitable Donation: ITA 110.1

- Corporations are permitted to deduct donations under Division C in

computing taxable income. Generally, donations are deducted equal to 75% of the corporation’s net income under Division B.

- If the gift was capital property, the donation would be deductible 100% of the - taxable capital gain.

- If the gift was depreciable property, the donation would be deductible 100% CCA recapture.

- The unused donation for a given year can be carried forward five years to be deducted in a carried forward year. The carried forward amount and the current year donation must meet the 75% limitation in the year.

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3.Loss carryovers: ITA 111(1) There are various kinds of losses. 1. Net capital loss

2. Non- capital loss 3. Restricted Farm loss 4. Farm loss

5. Limited Partnership loss Net Capital loss (Net CL):

Net CL for a corporation is the excess of Allowable Capital Loss (ACL)excluding losses on LPP and ABIL over Taxable Capital Gain(TCG) including taxable net gain from LPP.

Net CL = ACL – LPP – ABIL - TCG

LPP - subject to \$1,000 floor rule

-ACL on LPP can only be deducted against the TCG on LPP

- The excess ACL on LPP can be carried back to 3 year and forward 7 years The following table provides loss carry over period for net and non capital losses:

Back Forward

Net Capital loss 3 Indefinitely

Non capital loss:

Before March 23, 2004 3 7

March 23, 2004 – December 31, 2005 3 10

After December 31, 2005 3 20

- It is a capital loss arising from an arm’s length disposition of shares

or/and debt, establishing to be bad , or on bankruptcy action

- one –half of the business investment loss is known as allowable business investment loss

- ABIL, in the year of loss, can be deductible against any source of income - The unabsorbed ABIL will be treated as non-capital loss and carried over

accordingly (3 years back and 20 years forward)

- Further, if there is any unabsorbed ABIL, it will be treated as Net CL and

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Example 1:

Corp A sold 2 pieces of lands in 2008. The required information is as follows:

Land 1 Land 2

ACB \$60,000 \$100,000

P of D \$80,000 \$ 50,000

a)What is the tax consequences on the sales of both lands?

b)If the P of D of land 2 is \$90,000, What would be the tax consequences? Application of Net CL:

- Net CL must be applied against to the of TCG in the year.

- If the inclusion rate of the Net CL was different than the inclusion rate of the current year, the Net CL must be converted to the Net CL based on inclusion rate for the current year.

- The historical inclusion rate:

Prior to 1988 50% 1988 - 1989 66.67% 1990 - Feb 27 2000 75% Feb`28 - Oct 17, 2000 66.67% After Oct 17, 2000 50% Example 2:

A Limited had computed its net income under Division B for current year December 31 is as follows:

Par. 3(a) Income from non-capital sources:

Income from business operation \$ 66,625 Income from foreign property 7, 175 Dividend from Canadian Corp 12,300 Par. 3(b) Net taxable capital gain 30,750

Income under Division B 116,850

During the year the corporation made charitable donation of \$80,000. Its carry forward position from previous years was as follows:

Charitable donation 10,250

Non-capital loss 61,500

net capital loss – 1999 41,000 Required:

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Compute the taxable income for 2008. Non-Capital loss:

- Non capital loss can be applied against any source of income but is time-restricted.

- Non capital loss can be increased by the amount of any Net CL deducted in the year.

Ordering loses: 111(3) ITA

- A taxpayer must deduct a loss of a particular type in a chronological order as follows:

1. Non capital loss 2. Net capital loss 3. Restricted farm loss 4. Farm loss

Example P(1)3:

The following data summarize the operation of A Limited for the years of 2007 to 2010 ended September 30.

2007 2008 2009 2010

Income /loss from business 54,000 32,000 (75,000) 62,500 Dividend income TCC 42,500 22,500 18,000 10,500

Taxable Capital gain 11,000 2,500 5,000 9,000

Allowable Capital loss 2,000 4,500 3,500

-ABIL 3,750 - -

-Charitable donation 23,000 9,000 3,000 13,000

The corporation has net capital loss balance of 13,500whivh arose in 1999 Required: Compute the taxable income of A limited.

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II. BASIC COMPUTATION OF TAX FOR CORPORATION:

ABI Investment Dividend Total

Cnd For Can For Conn Port

Wholesaling Process 340,000

Maintenance & Servi -65,000

Patent Income 45,000

Rental Income 35,000

TCG net of loss 55,000

Recap of CCA 15,000

Interest on AR Whole 10,000

Interest on loan to sub 20,000

Inter. on Sinking fund 50,000

Forgn Busin. Income 40,000

Forn Non bus Income 25,000

Divid from a CCPC 12,500

Div. From Sub 17,500

Prot on sale of land 90,000

Div. B income 690,000

Deduct: Division C Charitable Donation Dividend Income Non Capital Loss Net Capital Loss

Taxable Income

Federal Tax @ 38%

Less: Federal abatement (10% x Allocation x TI) Add: Additional Refundable Tax

Less:

Manufacturing & Processing Profit Deduction General Rate Reduction

Non Business foreign tax credit Business foreign tax credit Investment Tax credit Federal political tax credit

Part I Tax Payable

Part IV Tax Provincial Tax Total Tax Payable

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Investment Tax credit Refund Dividend Refund

Tax Installments Paid

Balance Refund/ (owing)

Notes:

2 Patent income has been determined to be property income

3 Rental income was from leasing entire space for 5 years of unused warehouse in a small town

4 TCG & Recapture incurred in a disposition of equipment

5 The fund was used to buy equipment for active business income

6 Income tax of C\$10,000 paid on foreign business of 40,000

7 Withholding tax on non business income was C\$4,000

8

Land has been held for 5 years with an intention of profit on sales

9 The CCPC paid dividend was a non connected corporation

1 By paying dividend, the sub received a refund of 1,500

1 The following payments were made by the corporation: Political donation 7,500 Charitable donation 22,500 Dividend paid on July 15, 2009 37,500

2 The balances in tax account as of Jan 01, 2009

Charitable donation carry forward 2,500 Unused business foreign tax credit 3,500 Non Capital loss 42,500 Net capital loss in 1999 13,500

RDTOH Balance Nil

3 The gross revenue and salaries attributed to the permanent establishment is as follows: Reven ue Salaries Ontario 520,000 130,000 N.Brunswick 300,000 300,000 Quebec 600,000 280,000 US 390,000 65,000 Total 1,810,000 775,000

4 No allocation of business limit

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there was no leased fixed assets employed. 30% of the fixed are used in

manufacturing and processing.

The salaries and wage expenses are allocated as follows:

Processing 188,796

Wholesaling 300,150

Maintenance 221054

Total 710000

1.Federal Basic Tax

All corporations are initially subject to the basic tax rate of 38% (ITA 123). This rate is modified depending on the type of the corporation

Fed Basic Tax = 38% x TI 2.Federal Tax Abatement

ITA 124(1) provides a 10% of corporation’s taxable income earned in Canada is deducted from income taxes otherwise calculated. The abatement is based on taxable income earned in a province or territory in Canada. and wages. The taxable income earned in a province or territory is allocated based on Gross Revenue, and Salaries

Federal Tax Abatement = 10% x Allocation x TI Example 4:

Corp A incorporated in Ontario and has permanent establishments in the provinces of New Brunswick and Quebec, and in the USA. It has taxable income of

\$325,000.

The corporation has gross revenue and salaries and wages are attributable to its permanent establishment as follows:

Gross Revenue Salary or Wages Ontario 780,000 130,000 New Brunswick 2,340,000 520,000 Quebec 2,600,000 585,000 US 390,000 65,000 Total 6,110,000 1,300,00 0

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Interest not Attributable 130,000 0 6,240,000 1,300,00 0

Required:

Compute the Taxes otherwise payable based on the information:

3.Additional Refundable Tax ITA 123.3 –ART

This tax is paid on investment income of CCPC and is refundable when the corporation pays dividend.

If the corporation is CCPC, This tax is computed as follows: 6 2/3% of lesser of:

(a) Corporation’s AII (ITA 129(4)), and

(b) the amount, if any, TI – SBDB [ Small Business Deduction Base – ITA 125(1)(a) to (c )]

Aggregate Investment Income (AII) Can computed as follows (ITA 129(4)):

• Eligible portion of taxable capital gain

• Less: Eligible portion of Allowable Capital loss

• Less: Net capital loss deducted under Division C - ITA 111(1)(b)

• Income from Property – Interest, Royalty, Rent, and Dividend (Cnd, For’n)

• Less: Dividend Deducted under Division C (cnd, For’n)

• Less: Losses from Property ( Cdn and For’s)

A corporation resident in Canada can claim small business deduction from tax otherwise payable for a taxation year.

To claim the deduction:

1. The corporation must be a CCPC throughout the year

The amount for the deduction is computed as follows: SBD For 2010 = 17% of the least of:

Less: 1. 10/3 of NBFT credit without reference to ART and GRR 2. 3 (10/4) of BFT credit without reference to GRR

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3. Exempt income

Less: any portion allocated to associated corporation Elimination of SBD for large CCPC

(c ) Business limit \$ 500,000

500,000 x .225%(Taxable capital - 10,000,000) xx

\$11,250 xx

Non-Business Foreign Tax (NBFT) Credit for SBD Lesser of

a) Foreign Non-Business Income Tax paid

b) Foreign Non business income x Taxes otherwise payable

Adj. Division B Income Taxes otherwise Payable: Basic Federal Tax

Minus: Federal Abatement Adj. Division B Income : Division B Income

Less: Net Capital loss Deducted under Division C Less: Dividend Deducted under Division C

Example 5:

Corporation A, CCPC, has fiscal year end of December 31. Corp A is not

associated with any other corporations and all of its income is earned in Canada. The following selected tax information has been provided for 2008.

Taxable income 583,500

and taxes paid of \$4,000 25,000

Division B income 690,000

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Net Capital loss deducted 9,000 85% of taxable income is allocated to Canada

Required:

Determine corp A BFT credit for SBD

Business Foreign Tax (BFT) Credit for SBD The least of:

(a) The total of business income tax paid Plus Unused foreign tax credit

(b) Foreign business income x Taxes otherwise payable Adj. Division B Income

(c) Taxes otherwise payable less Non-business income tax deduction Taxes otherwise payable :

Basic Federal Tax @38% Adj. Division B Income : Division B Income

Net Capital loss Deducted under Division C Dividend Deducted under Division C

Example 6:

Corporation A, CCPC, has fiscal year end of December 31. Corp A is not

associated with any other corporations and all of its income is earned in Canada. The following selected tax information has been provided for 2008.

Taxable income 583,500

and taxes paid of \$10,000 40,000

Division B income 690,000

Dividend deducted 30,000

Net Capital loss deducted 9,000 85% of taxable income is allocated to Canada

Required:

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5.Manufacturing and Processing Profit Deduction: Eligibility:

- Manufacturing means the creation of some thing or the shaping, stamping or forming of an object from something.

- Processing involved all of the operations which render a product more usable or more marketable. Ex. Making pizza and packaging is

considered to be manufacturing and processing but serving food is not a part of it.

- Gross revenue from manufacturing and processing exceeds 10% of gross revenue from all Canadian active business.

The formula:

10% of the lesser of:

(a) Canadian Manufacturing and Processing profit [MP] Less: SBDB (125(1)(a) to (c)

(b)Taxable Income Less: Total of:

(i) SBDB [125(1)(a) to (c)

(ii) 10/4 FBT credit calculated without reference General Rate Reduction

(iii) If it is CCPC, the AII MP = (ML + MC) x ADJUBI

(L + C )

MP – Manufacturing and processing profits eligible for reduced rate

ML – 100/75 of direct manufacturing and processing labour, to the maximum of L L - Total labour related to income earned in Canada

MC – 100/85 of direct manufacturing and processing fixed annual capital cost ( 10% of the gross cost to the maximum of C)

C - Total fixed annual capital cost (10% of Gross Cost) ADJUBI – Net active business income earned in Canada

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Example:

The following data pertain to CorpA, a public corporation, for the current year. Processing revenue in Canada 2,500,000 Processing Expense:

Direct Labour 1,427,500 Allocated admin, material

Plant & O/H 947,500 2,375,000 Wholesale sales of fertilizer in Canada 1,350,000 Wholesale expense:

Direct labour 322,500 Allocated admin, material

Plant & O/H 865,000 1,187,500

The company processing and wholesaling capacity is provided by owned fixed assets having a capital cost of \$3,125,000 and leased fixed assets having an annual lease cost of \$62,500. Seventy percent of the owned fixed assets and 85% of the leased assets are used in processing.

In addition to the revenue noted above, the company received dividends in the amount of \$25,000 from a Canadian subsidiary and interest income (investment income) of \$40,000 from long term government bond which will be held maturity in 2013. Administration and over head expenses includes \$125,000 paid in salaries and wages to people not engaged in qualified manufacturing and processing

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Solution: MP = (ML + MC) x ADJUBI (L + C ) Processing income 2,500,000 Expense 2,375,000 Processing income 125,000 Wholesale income 1,350,000 Wholesale expens 1,187,500 162,500 Total labour 287,500 Total labour expense

Direct Labour processing 1,427,500 DL Wholesale 322,500 Labour salary 125,000 1,875,000 ML. D. Manufacturing 1,427,500/75% 1,903,333 Maximum ML 1,875,000 C Manufacturing capital 3,125,000 *10% *10% 312,500 Leased assets 62,500 Total capital 375,000 MC Owned asset 312,500*70%=218,750 Leased asset 62,500*85%= 53,125 271,875 Gross 271,875/85% 319,853 MP = (319,859 + 1,875,000) x 287,500 = 280,453 (375,000 + 1,875,000 )

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Example 7:

This example is continuation of sample problem:

The following data pertain to sample Corp. for taxation year ended December 31, 2010:

The corporation owned fixed assets having a capital cost of \$ 8,750,000 and there was no leased fixed assets employed. 30% of the fixed assets are used in

manufacturing and processing.

The salaries and wage expenses are allocated as follows:

Processing 188,796

Wholesaling 300,150

Maintenance 221,054

Total 710,000

Required:

(A) Calculate Canadian manufacturing and processing profits for the company

in 2010.

(B)Calculate the manufacturing and processing profit deduction for 2010

assuming that the company is not eligible for small business deduction.

6.General Rate reduction: ITA 123.4(2)

A corporate taxpayer can deduct an amount from corporation’s tax otherwise

payable. The amount is calculated as product obtained by multiplying the corporate general rate percentage by the corporation’s full-rate taxable income for the

taxation year.

GRR = Full rate taxable Income x General rate reduction percentage The General rate percentage for 2010 is 10%

The full rate taxable income is computed as follows: For CCPC:

Taxable Income Less: M&P Profit

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SBDB AII

7.Foreign Tax Credits:

Where a Canadian corporation earns income either from business or investment from foreign country, it must pay taxes according to the tax laws of the country. The taxpayer who pays taxes to taxing authority in a country will be eligible for tax credit in Canada to eliminate double taxation.

Non-business foreign Tax Deduction(NBFT): ITA 126(1)

Where a taxpayer has non-business income such as interest income from another country and has paid foreign income or profit taxes to the government of the country, the taxpayer may take a deduction from Canadian tax as follows: Lesser of:

(a) Foreign non-business income tax paid (b) Foreign non-business income (Div B)

Adj.Div B income x Taxes otherwise Payable

The amounts to be subtracted from division B income of a corporation are: 1. The claims for Net Capital Loss carried over because they directly offset

taxable capital gain (ITA 111(1)(b)

2. The amount of taxable dividend received and deductible and

3. The amount of dividend received from a foreign affiliate and deductible

Tax otherwise Payable: ITA 126(7)

Tax otherwise payable for NBFT is computed as follows: Basic corporation tax - 38%

Plus: ART

Less: Federal Abatement Less: General rate reduction Example 8:

Pub Corp. determined that the income for tax purposes was of \$472,000 for the year ended December 31, 2008. The additional information:

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Interest received from US corp. net (\$3,000 withheld) 17,000 Interest received from UK corp. net (\$1,500 withheld) 8,500 Business income net (withholding tax 9,800) France 18,200

Donation 20,000

Dividend from taxable Canadian corporation 52,000

Taxable income earned in a province 375,000

Required:

Compute the foreign tax credits.

Where a corporation resident in Canada carries on a business on unincorporated basis, the taxes paid on income or profit to the government other than Canada is eligible for deduction. The business foreign tax deduction is computed as follows: The least of:

(d) The total of business income tax paid Plus Unused foreign tax credit

(e) Foreign business income x Taxes otherwise payable

(f) Taxes otherwise payable less Non-business income tax deduction ITA 126(1)

Tax otherwise Payable: ITA 126(7)

Tax otherwise payable for BFT is computed as follows: Basic corporation tax - 38%

Less: General rate reduction

Summary for Taxes otherwise payable

NBFT BFT

Base Amount of Part I tax 38% yes yes

Minus: Federal Abatement yes no

Plus: ART yes no

Minus: General Rate deduction yes yes

Circular Calculation with ART:

There is a circular calculation in computing SBD, FTC, and ART. To eliminate the difficulties, the following steps must be taken:

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2. Compute BFTC ( ART is not included in taxes otherwise payable).

3. Compute SBD using the above numbers

4. Recalculate the NBFTC using ART in the taxes otherwise payable. 5. Recalculate the BFTC using NBFTC.

Example 9 :

Corp A is a Canadian public corporation. For the year ending December 31, 2008, it has net income for tax purposes of \$ 146,000, including foreign business income of \$20,000. The foreign government withheld \$3,000 in taxes on this income, resulting in a net remittance of \$17,000. Non of the companies income involved in manufacturing and processing and, 88% of the company’s income was allocated to a province . In calculating taxable income the company deducts \$30,000 in

dividend received from taxable Canadian corporation , a non-capital loss carry forward of \$75,000, and a net capital loss carry forward of \$25,000.

Required:

Determine the corporate Part I tax payable for the year 2008.

### Acquisition of Control and its effect on loss:

When control of a corporation is acquired by another person or group of person, the losses will be affected as follows:

1.The unutilized 1. net capital losses 2. Losses from property

will expire. 2. The carry forward of:

1. non capital loss

2. farm loss are restricted. The effect of acquisition of control:

1. Deemed year end

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- the new year starts

- The taxpayer may have a choice for the new year end. It may choose the previous normal year end or the new year end.

2. Accrued or unrealized loss on inventory

- each item of inventory must be valued at LCM

- Any unrealized loss on inventory would be realized on acquisition of control

3. Unrealized loss on Account receivable

- revision of reserve for doubtful account for actual bad debt - a fixed percentage of reserve as doubtful debt is not allowed on

acquisition of control.

- Accrued loss on Account Receivable become part of the non-capital loss or farm loss which are deductible.

4. Unrealized loss on depreciable property

- The unrealized loss is computed as follows:

UCC – (FMV + CCA and terminal loss of the class in the deemed year end

The excess amount

5. Option or Election:

A corporation is permitted to elect to have a deemed disposition for any depreciable or non-depreciable capital property on which capital gain or recapture have accrued.

Example 10:

In 2007, a chain of bakeries, called Buscat Ltd., commenced operation. The industry is highly competitive and because of Mr. Buscat’s lack of marketing skills, the corporation incurred losses in the first three taxation years of operations as follows:

Taxation year-end Non-capital losses Capital losses Dec. 31, 2007... \$60,000 \$12,000 Dec. 31, 2008... 45,000 8,000 Dec. 31, 2009... 25,000 4,000

On July 1, 2010, Mr. Buscat decided to sell 75% of his common shares to Mr. Bran, owner of Buns Plus Ltd. Mr. Bran has been in the business of supplying bread dough, pastry dough and bun bags for ten years and has been very successful. Buns Plus Ltd. has two divisions: a bakery and a coffee shop, which it intends to transfer to Buscat Ltd.

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The following income tax data relates to Buscat Limited’s operations from January 1, 2010 to June 30, 2010:

valuation)... \$10,000 (b) Allowable capital loss... 2,000 (c) Property loss... 5,500 (d) Assets at June 30, 2009: Cost/AC B UCC FMV Inventory... \$85,000 — \$ 65,000 Land... 155,000 — 195,00 0 Building (Class 1)... 65,000 \$45,000 75,000 Bakery equipment... 100,000 86,000 70,000

During the later part of the 2010 calendar year, the bakery/coffee shop of Buns Plus Ltd. was transferred to Buscat Ltd. For the six-month period ending on December 31, 2010, Buscat Limited had net income of \$90,000 from all its businesses.

The net income earned was as follows:

Buscat bakery... \$

(55,000) Buns Plus bakery... 130,000 Coffee shop... 15,000 \$ 90,000

In the 2011 taxation year, Buscat Ltd. expects to earn \$250,000, of which \$65,000 will be from the original Buscat bakery business and \$20,000 from the coffee shop business.

—REQUIRED

Prepare an analysis of the income tax implications of the acquisition of shares. In your analysis, consider the two election options from which an election choice is most likely to be made.

Example for manufacturing processing Deduction:

The following data pertain to Corporation A Limited., a public company, for the taxation year ended on December 31, current year.

Processing Expenses;

Direct labour 1,427,500

Admin, material, plant O/H Expenses 947,500 2,375,000

Whole sales 1,350,000

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Direct labour 322,500

Admin, Matrial, plant O/h Expenses 865,000 1,187,500

The company’s processing and wholesaling capacity is provided by owned fixed assets having a capital cost of \$3,125,000 and leased fixed assets having annual lease cost of \$62,500. Seventy percent of the owned assets and 85% of the leased assets are used in the processing.

In addition to the revenue noted above, the company received dividend in the amount of \$25,000 from a Canadian subsidiary and interest income (investment income) of \$40,000 from long-term government bonds which will be held to maturity in 2013. Administration and overhead expenses include \$125,000 paid in salaries and wages to people not engaged in qualified manufacturing and processing activities.

Required:

125

There may be deducted from the tax otherwise payable under this part for a taxation year by a corporation that was, throughout the taxation year, a Canadian controlled private corporation, an amount equal to the corporation’s small business deduction rate for the taxation year multiplied by the least of

a. The amount, if any, by which the total of

1. The total of all amounts each of which is the income of the corporation for the year from an active business carried on in Canada(other tahn the income of the corporation for the year from a business carried on by it as a member of a partnership), and

2. In the specified partnership income of the corporation for the year Exceeds the total of

3. The total of all amounts each of which is a loss of the corporation for the year from an active business carried on in Canada(other than a loss of the corporation for the year from a business carried on by it as a partnership),and

4. The specified partnership loss of the corporation for the year

b. The amount, if any, by which the corporation’s taxable income for the year exceeds the total of

1. 10/3 of the total of the amounts that would be deductible under subsection 126(1) from the tax for the year otherwise payable under this part by it if thouse amounts were determined without reference to sections 123.3&123.4 (ART, GRR)

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2. 10/4 (3) of the total of the amounts that would be deductible under 126(2) from the tax for the year otherwise payable under this part by it if those amounts were determined without reference to section 123.4, and (GRR)

Proposed Amendment Oct29,2007

3. The amount, if any, of the corporation’s taxable income for the year that is not, because of an act of parliament, subject to tax under this part, and

c. The corporation’s business limit for the year (1.1) Small business deduction rate

For the purpose of subsection 1, 126

(1)Foreign tax deduction

A taxpayer who was resident in Canada at any time in a taxation year may deduct from the tax for the year otherwise payable under this part by the taxpayer an amount equal to

a. Such part of any non-business income tax paid, by the taxpayer for the year to the government...

Proposed amendment Not exceeding, hower,

b. That proportion of the tax for the year otherwise payable under this part by the taxpayer that

1. The amount...taxpayer’s qualifying incomes exceeds the total of the taxpayer’s qualifying losses

2. The total of

A.the amount, if any, by which Par 111(b)Net capital loss

Div deducted

NBFTC

Lesser of 1. Foreign tax paid

Updating...

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