Question

Maple co. is a new canadian controlled private corporation with active business income of $450,000 in its first year of operations. capital gains recognized by the company during the year totaled $30,000. how much is maple co.'s small business deduction for the year?

a. $85,500
b. $88,350
c. $91,200
d. $95,000

Answer 1

Maple Co.'s small business deduction for the year is $43,200.

Step-by-step explanation:

To calculate Maple Co.'s small business deduction, we need to determine the Corporation's taxable income for the year. The small business deduction is equal to the lesser of $500,000 or the Corporation's taxable income multiplied by the federal small business deduction rate.

In this case, Maple Co.'s taxable income is the sum of its active business income ($450,000) and capital gains ($30,000), which totals $480,000. Since $480,000 is less than $500,000, we can use it for the calculation.

The federal small business deduction rate for this year is 9%. Therefore, Maple Co.'s small business deduction for the year is $480,000 multiplied by 9%, which equals $43,200.