Question

Which of the following can be included as a Division C deduction during the year? Multiple Choice

1. A net-capital loss from the previous year by Small Inc. which earned only active business income during the year
2. A donation made to a registered charity by an individual
3. Dividends received from a taxable Canadian corporation by ABC Co. (a CCPC)
4. Dividends received from a taxable Canadian corporation by an individual

Answer 1

The correct Division C deduction is dividends received from a taxable Canadian corporation by ABC Co. (a CCPC), as they may qualify for the Dividend Received Deduction (DRD).

Step-by-step explanation:

The question is about identifying which of the given options can be included as a Division C deduction during the year for tax purposes. For corporations, specifically Canadian-Controlled Private Corporations (CCPCs) like Small Inc. and ABC Co., corporate income taxes are paid on their annual profits, and certain deductions may apply to reduce taxable income. The correct choice that can be included as a Division C deduction in this context would be:

• Dividends received from a taxable Canadian corporation by ABC Co. (a CCPC)

This is because a CCPC receiving dividends from another taxable Canadian corporation could potentially qualify for a deduction called the Dividend Received Deduction (DRD). The other options, such as a net-capital loss from the previous year, a donation made by an individual, and dividends received by an individual, are treated differently under the tax code and are not classified as Division C deductions for a corporation.