FMT11 Problem: Small Business Deduction - Botsal Inc.

FMT11 Problem: Small Business Deduction - Botsal Inc.

The taxable income for Botsal Inc. (Botsal) for the 2007 taxation year was $624,000. All

taxable income was generated from business activities with the exception of $2,000 in foreign

interest income on which tax of 10% was withheld. Of the business income, $33,000 was earned

outside of Canada. The foreign taxes withheld on this business income were $5,500.

Botsal is associated with Latsob Inc. (Latsob) for Canadian tax purposes. The two corporations

have agreed to share the small business limit equally.

Required:

Determine the amount of small business deduction that Botsal may claim for 2007.