Question

Overton Ltd. is a Canadian controlled private corporation. During 2019, the Company

received the following amounts of dividends:

Dividends on Various Portfolio Investments                $21,300

Dividends from Saston Inc. [(100%) ($62,300)]          62,300

Dividends from Raston Inc. [(40%) ($90,0 00)]           36,000

Overton Ltd. owns 100 percent of the voting shares of Saston Inc. and 40 percent of the voting shares of Raston Inc. The fair market value of the Raston Inc. shares equals 40 percent of the fair market value of all Raston Inc. shares.

As a result of paying the $90,000 dividend, Raston Inc. received a dividend refund of $25,000. Saston Inc. received no dividend refund for its dividend payment.

Required Determine the amount of Part IV Tax Payable

Answer 1

Tax on  Portfolio Investments ($21,300 * 38.33 %)	$8,164
Tax on Dividends from Raston Inc ($25,000 * 40 %)	$10,000
Tax on Dividends from Saston Inc.	$0
Part IV Tax Payable	$18,164

Note:

Part IV Tax Payable calculation basis

Dividends received from Portfolio Investments ie unconnected company is taxed at the of 38.33 %

Dividends received from the connected companies is taxed on the amount of divided refund received by those company. Since Saston Inc did not receive any dividend refund for its dividend payment, Part IV Tax Payable on dividend received from Saston Inc. is nil.