Question

X Ltd. paid Part I federal tax of $26,473 on taxable income of $200,000 that included deductions for a net capital loss $15,000 and a non-capital loss of $8,000. Net income for tax purposes includes $12,000 of interest income, $20,000 taxable capital gains, and $10,000 of eligible dividends received from sundry Canadian public companies. X claimed the small business deduction on active business income of $110,000. At the end of the previous year, X had a Non-eligible RDTOH balance of $30,000. X did not declare dividends in the previous or current year. Determine X's Non-eligible RDTOH balance at the end of the current year. $___

Answer 1

Sol :

The federal government levies a tax on any investment income earned by a corporation. This includes interest income, capital gains income and most income from property. The tax goes into the company's RDTOH account with CRA and is refunded to the corporation when it pays a taxable dividend.

When corporation fails to pay taxable dividend then balance in RDTOH becomes ineligible.

Non-Eligible RDTOH Balance includes

Interest Income $12,000

Dividend Income $10,000

Capital Gain $20,000

Less :

Capital Loss $15,000

Total Ineligible RDTOH = $ 27,000