Final answer:
The Big Corp.'s taxable income for year 1 is likely $215,000 after accounting for a net income of $230,000, $25,000 in dividends from a Canadian corporation, which may be eligible for the Dividend Tax Credit, and $15,000 in charitable donations.
Step-by-step explanation:
The question asks us to calculate the taxable income of The Big Corp., a Canadian controlled private corporation, after considering its net income, received dividends, and charitable donations. The corporation's total net income for tax purposes is $230,000. However, there are certain deductions and additions that must be accounted for when calculating the taxable income.
First, the $25,000 in dividends received from a taxable Canadian corporation would typically be added to the net income, as dividend income is usually taxable. However, under Canadian tax law, certain dividends known as 'eligible dividends' received from Canadian corporations can be eligible for the Dividend Tax Credit, which effectively makes this income non-taxable for The Big Corp.
Second, the $15,000 donation to a registered charity is usually deductible from the net income. This would reduce The Big Corp.'s taxable income, as charitable donations are often considered allowable deductions under Canadian tax law.
Combining these adjustments, we subtract the charitable donation from the net income: $230,000 - $15,000 = $215,000. As the dividends might be non-taxable due to the Dividend Tax Credit, they would not be added back to the net income.
Therefore, the correct taxable income of The Big Corp. for year 1 is likely to be $215,000 (Option C).