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Corporate Tax - Investment Income
COURSE INTRODUCTION & ADMINISTRATION
Welcome - Introduction to the course - How it is laid out, prerequisites and content (6:10)
Prerequisite for this course or general knowledge you will need (3:31)
Evergreen approach to teaching this course and your corporate tax knowledge (2:58)
Administration - Course notes, certificates and refund policy (6:25)
Software used in this course and notes about using software (3:05)
COURSE NOTES - Download Course Notes and PowerPoint Presentation (2:25)
SECTION 1 - INVESTMENT INCOME - CONCEPTUAL & INTEGRATION
Review of the fundamental concepts of investment income (10:04)
Not all investment income is taxed equally -personal vs, corporate investment income (7:15)
How to navigate the corporate tax rate tables for investment income and how rates are calculated (9:18)
Example showing a flow through of interest and dividend income using tax software on the T2 return (9:29)
Integration of investment income walk-through for interest and other investment income (13:40)
Integration of corporate dividend income and capital gains (11:26)
SECTION 2 - INVESTMENT INCOME & T2 PREPARATION
Income in corporations broken down into various pools for reporting & tax calculations (3:47)
Overview of the investment income schedules and where investment income is reported (4:24)
Schedule 7 as the hub for T2 preparation for corporation with investment income (4:27)
T2 Preparation Case Study - Barnes Dentistry Professional Corporation (2:54)
Barnes Dentistry PC - Reporting the investment and rental income - Schedule 7 (6:36)
Barnes Dentistry PC - Reporting the dividend income received = Schedule 3 (4:56)
Barnes Dentistry PC - Reporting the capital gains - Schedule 6 (3:54)
Barnes Dentistry PC - Reporting income on financials and reconciling Schedule 1 (4:58)
Barnes Dentistry PC - Analyzing and reconciling the corporate tax payable (4:02)
Barnes Dentistry PC - Overview of the refundable tax accounts (3:06)
Barnes Dentistry PC - Review of Schedule 7 and the refundable accounts (6:04)
Example of foreign tax credits on the T2 return and Schedule 21 (4:47)
Understanding foreign income in corporations and how to report it on the T2 (5:01)
Example of foreign tax credits on the T2 return and Schedule 21 (4:47)
Foreign income reporting in corporations using the T1135 (2:46)
SECTION 3 - GRIP - ERDTOH & NERDTOH - PAYING DIVIDENDS TO SHAREHOLDERS
Paying dividends to shareholders - old RDTOH regime versus new ERDTOH & NERDTOH rules (6:08)
Foundation for new regime - Overview of the GRIP pool and Schedule 53 and importance (7:06)
Case Example - Amco Windows and Doors and the GRIP balance (7:15)
Amco Windows & Doors - Excessive Eligible Dividend Tax and avoiding having this penalty apply (6:30)
Amco Windows & Doors - Adding investment income into mix and RDTOH accounts (13:28)
Amco Windows & Doors - Adding eligible dividend income into mix and RDTOH accounts (7:18)
Amco Windows & Doors - What if the dividends received were ineligible instead? (2:43)
Barnes Dentistry PC - Deciding on dividend mix to pay Natasha - Review of Barnes Dentistry accounts (2:57)
Barnes Dentistry PC - Determining the mix of dividends to pay out to optimize refund (7:42)
Summary of the rules and explanation of the thought process of new rules (9:36)
SECTION 4 - SMALL BUSINESS DEDUCTION GRIND ON PASSIVE INCOME OVER $50,000
Why all this complexity and what is the government trying to accomplish? (5:34)
Overview of the Small Business Deduction grind and investment income over $50,000 (4:24)
Example of new rules and calculations on passive income over $50,000 (4:43)
Looking at things a different way - This corporate group is paying tax on investment income of 125%? (4:09)
What are practitioners across Canada doing to address this issue? (2:38)
Thought process on options for corporations or groups with high investment income (6:50)
Adjusted Aggregate Investment Income calculation and differences with AII (5:13)
Demarco Family Holdings Ltd. - 2018 T2 return with investment income (5:33)
Lightshine Sunrooms & Decks Ltd - 2019 T2 return with SBD grind from investment income (6:47)
SECTION 5 - CDA ACCOUNT AND & PAYING OUT CAPITAL DIVIDENDS
What is the Capital Dividend Account and why does it need to be tracked (3:41)
The components of the Capital Dividend Account and how it is calculated (4:48)
Excess capital losses and negative CDA balances and example showing this nuance (4:36)
Example of a CDA calculation for DiMarco Family Holdings Inc. (3:47)
Completing the Schedule 3 when Capital Dividends are received (3:45)
Keeping track of the CDA on Schedule 89 of the T2 return and request for verification from CRA (5:16)
Making the election to file a Capital Dividend using the Election form T2054 (9:41)
Payment to shareholders - When is the shareholder is entitled to CDA? - declared vs. payment date (3:00)
Tax on excessive dividends and election to avoid additional tax (5:19)
Filing deadlines for the declaration and payment of Capital Dividends (5:26)
The CDA election in practice and some practitioner insights (5:15)
SECTION 6 - CALCULATING RDTOH ON INTERCOMPANY DIVIDENDS
Overview of connected corporations and intercorporate dividends (4:39)
Example showing the filing of Schedule 3 with intercorporate dividends (5:25)
Refundable taxes when dividends are paid between connected corporations (7:42)
Example of RDTOH flow between Holdoo and Opco (7:10)
The problem that arises when a corporations does not own 100 of shares (3:56)
An additional example using numerous corporations (6:01)
Filling out the Schedule 3 for Holdco with numerous connected corporations (4:59)
SECTION 7 - ACCOUNTING FOR INVESTMENTS & T2 PREPARATION
Reporting investment income in corporations vs personal income tax (4:55)
Understanding journal entries as the basis for reporting investment income (5:30)
Different approaches to use to enter investment income transactions (4:12)
Trident Investments Inc - A look at how investment transactions are tracked (6:25)
Trident Investments Inc - Review of journal entries for investment income (11:00)
Trident Investments Inc - Overview of the T-slips received and entering the mutual fund allocations (10:01)
Trident Investments Inc - Methodology 2 - Recording the investment income from the T-slips (4:36)
Trimark Investment Inc. - Entering the journal entries from the slips and preparing the T2 (13:57)
SECTION 8 - INVESTMENT INCOME REPORTING FOR NON-CALENDAR YEAR ENDS
Dealing with investment income where the corporation has a non-calendar year end (6:26)
Consider changing the year end for investment corporations (4:09)
What exactly is the problem with non-calendar year fiscal years (4:52)
Option 1 - Report investment income that you know and then estimate other income (4:56)
Option 1 - Year 2 - The methodology for year 2 as we proceed through the years (5:59)
Option 2 - Book the investment income using the T-slips year to year (6:14)
Reconciling the T-slip income and how investment income flows over time (4:30)
Using the clearing account when a corporation has non-calendar year ends (5:37)
Example of Trident Investments using a clearing account with a Dec 31 year end (6:51)
What the clearing account tells us for non-calendar year ends (5:18)
Balancing the year end of the corporation and information provided (4:59)
A good hybrid approach to reporting investment income to increase accuracy (5:00)
SECTION 9 - OTHER INVESTMENT INCOME AND TOPICS
Deducting expenses against investment income (4:04)
Example of deducting investment expenses with only passive income (3:16)
Issues when a corporation has both ABI and Investment income with expenses (4:32)
Be careful when deducting other expenses against investment income (6:03)
Should you deduct expenses from Dividends and thereby reduce Part IV tax? (9:56)
Issues of reducing investment income in a corporation with salaries (3:54)
With new SBD grind and passive income over $50,000 rules we have to be more cautious (4:14)
A possible approach to making a claim for reasonable salaries on invest income (3:53)
Understanding and analyzing a client's investment income reports and documents (5:25)
Some examples of investment reports and a reconciled investment working paper (10:50)
Conclusion - next steps and testimonials (1:12)
Tax on excessive dividends and election to avoid additional tax
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