Niles Wholesale Ltd. (“NWL”), is a Canadian controlled private corporation that was
incorporated fifteen years ago by Ms. Jessenia Niles. Its only business activity is the sale of
French sourced cookware to upscale kitchen retailers across Canada. Ms. Niles is a Canadian
resident and is the sole shareholder of the Company. NWL has a fiscal year ending on 31,
and, for 2020, NWL’s accountant produced the following Income Statement:
Sales Revenue $1,916,400
Cost of Goods Sold ( 940,000)
Gross Profit $ 976,400
Operating Expenses:
Selling and Administration ($315,000)
Amortization Expense ( 47,000)
Charitable Donations ( 15,000) ( 377,000)
Operating Income $ 599,400
Other Income and Losses:
Eligible Dividends Received $ 27,000
Loss on Sale of Truck ( 19,000)
Gain on Sale of Investments 7,000 15,000
Pre-Tax Accounting Income $ 614,400
Other information:

  1. NWL had depreciable assets with the following undepreciated capital cost (UCC) balances at
    the beginning of its 2020 taxation year:
    Class 3 (5%) $726,000
    Class 8 (20%) 472,000
    Class 10 (30%) 22,000
    The balance in Class 10 reflects a single truck that was used for deliveries. It had an original
    cost of $38,000 and a net book value for accounting purposes of $29,000. It was sold in 2020
    for $10,000, and replaced with a leased truck.
    The only other transaction involving depreciable assets during the year was the acquisition of
    $82,000 in Class 8 assets.
  2. On January 1, 2020, NWL had an Eligible RDTOH balance of $14,000 and a Non-Eligible
    RDTOH balance of nil.
  3. On January 1, 2020, NWL has a GRIP balance of $132,500. During 2019, the Company
    designated $9,600 of its dividends as eligible.
  4. For 2019, NWL had ADJUSTED Aggregate Investment Income of $24,680. Its Taxable
    Capital Employed in Canada was $4,672,000 for 2019.
  5. During 2020, NWL paid $17,000 in dividends to Ms. Niles. It is the policy of the corporation to
    only designate dividends as eligible to the extent that a refund will be available on their
  6. The investments that were sold during the year had been purchased for $93,000. They were
    sold for $100,000.
    Required: Show all of the calculations used to provide the following required information,
    including those for which the result is nil.
    A. Determine NWL’s minimum Net Income for Tax Purposes and Taxable Income for the year
    ending December 31, 2020.
    B. Determine NWL’s Part I Tax Payable for the year ending December 31, 2020.
    C. Determine the refundable portion of NWL’s Part I Tax Payable.
    D. Determine NWL’s Part IV Tax Payable for 2020.
    E. Determine NWL’s GRIP on December 31, 2020.
    F. Determine the December 31, 2020 balances in NWL’s Eligible and Non-Eligible RDTOH
    G. Determine the 2020 dividend refund, showing separately the amounts related to eligible and
    non-eligible dividends.
    H. Determine NWL’s federal Tax Payable for the year ending December 31, 2020. This should
    include both Part I and Part IV Tax Payable, net of any dividend refund.

Sample Solution