Assignment on Allowable Deductions in Tax- Jianshi Inc
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Added on 2019-09-20
PART A: Allowable Deductions1)Jianshi Inc. has a taxation year that ends on September 30. On July 1, 2015 it declared a bonus of $100,000 payable to Jessie Lee. The bonus will be paid on February 1, 2016.Describe the tax consequences of this bonus declaration and payment on both Jessie and Jianshi Inc.2)Gluetec Manufacturing Co., a CCPC, has just ended its first fiscal year. A number of payments were made for which the Company is uncertain as to the correct tax treatment. You have been asked to advise them in this matter. Below is a listing of the outlays in question:a)Part of the Company’s raw materials had to be imported from Egypt. In order to obtain local financing for these inventories, the Company paid a $1,200 fee to anEgyptian financial consultant for assistance in locating the required financing.b)Donations totalling $12,000 were given to various registered Canadian charities.c)$2,500 was paid to the owner of a parcel of land in return for an option topurchase the land for $950,000 for a period of 2 years. Management believesfuture expansion of the Company’s manufacturing facilities may be required, andthis land is beside their current operations.d)Direct costs of $7,500, related to incorporating the Company, were incurredduring the year.e)An amount of $10,000 was paid for a franchise giving the Company the right tomanufacture a Brazilian consumer product for a period of ten years.f)Because of its rapid growth, the Company was forced to move into a buildingthat they had originally leased to another company. In order to cancel the lease,it paid $8,000 to the tenant. In addition, $9,500 was spent to landscape thefacilities and another $13,000 was spent to provide a parking lot for employees.Required: For each item - Indicate whether or not you feel that Gluetec Manufacturing Co. will be able to deduct in the calculation of net business income for the current year. Provide the appropriate reference to back up any you feel they can claim.
PART B: CCA/ CEC 3)Fluent Ltd. has determined that, for the current year, it has Taxable Income before thededuction of CCA of $40,000. It is the policy of the Company to limit CCA deductions toan amount that would reduce Taxable Income to nil. At the end of the year, before thededuction of CCA, the following UCC balances are present:Class 1 (Buildings Acquired In 2005)$475,000Class 895,000Class 10102,000Class 10.126,000There have been no additions to or dispositions from these classes during the year. Whichclass(es) should be charged for the $40,000 of CCA that will be required to reduce TaxableIncome to nil? Explain your conclusion.PART C: MOVING EXPENSES4)On June 1, 2015, Henry Walowitz moves from Toronto to Halifax at the request of hisemployer. Prior to this date, he spent $1050 on a house hunting trip to Halifax.However, he was not successful and, given this, he has signed a one-year lease for anapartment at his new location. The legal fees and real estate commissions associatedwith the sale of his Toronto house were $7,200. The actual costs of the move, includingamounts paid to a moving company, totaled $12,600. His employer agreed to pay$7,000 of his moving costs.Mr. Walowitz’s salary for 2015 was $54,000. Determine his maximum moving expense deduction for 2015