Introduction:
You have been presented with some tax information from your client, Katherine Marlowe, the 100% shareholder of Beans and Greens Ltd., (BGL) who asked for your advice in determining both her and BGL's taxable income and taxes payable for the 2019 taxation year. As the filing deadline looms, you will need to begin working on this file immediately.
Purpose of the Assignment
The purpose of the assignment is to incorporate the following elements:
1. Application of course concepts, Canadian Income Tax legislation, and court rulings to real-world taxation issues and scenarios.
2. Further development of analytical, problem-solving, and written business communication skills.
3. Increased working knowledge of Excel worksheet preparation.
General Requirements and Assumptions
You are required to determine both Katherine and BGL's Net Income for Tax Purposes by providing a breakdown of the various categories of income according to the Ordering Rules in Section 3 of the Income Tax Act. In addition, taxable income and taxes payable must also be determined using the information provided. The results must be communicated in a one page memo to each client separately.
- Attractive Cover Page (File Cover) for your report (to be presented to your clients).
- Use report format for content.
- Contents - a one page memo to your clients outlining the net results of your review. You will need to provide specific details that you feel will help your clients gain a better understanding of how taxes payable were determined. You will need to identify the total taxes owing and a description of how you were able to determine them. Remember, your clients may not have a good understanding of the Income Tax legislation, so keep this in mind when preparing your memos.
Required
Part 1 - BGL
a. Under Part I of the Income Tax Act, calculate Beans and Greens Ltd.'s minimum net income for tax purposes and minimum taxable income for the 2019 taxation year in accordance with the ordering provisions found in section 3 of the Income Tax Act.
b. Based on your answer to part (a), calculate the minimum Part I and Part IV federal income tax, and RDTOH for the 2019 taxation year.
c. Briefly explain the tax implications of the proposed plan to pay a dividend in 2020 (Exhibit 2-1, item 11).
Part 2: Katherine Marlowe
a. Calculate Katherine's minimum net income for tax purposes in accordance with the ordering provisions found in section 3 of the Income Tax Act, and her minimum taxable income for the 2019 taxation year.
b. Based on your answer to part (a), calculate Katherine's minimum federal income tax for the 2019 taxation year. Show all calculations.
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