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Duncen Ltd$,$ is a Cenadian$-$controlled private corporation owned by Mr$.$ William Duncan. Mr$.$ Duncan purchased all shares of Duncan Ltd$,$ on

July $1$ of the prior year for $$500,000$ in an arm's length transaction. Duncan Ltd$,$ manufactures fabrics and will continue with its June $30$ year end. The following is Duncan Lid,$\text{'}$s income statement for the period of July $1$ to June $30$ of the current year. CHECK PICTURE OF JNCOMEINCOME STATMENT!!!

ITA: $18,19,20,67\mathrm{.}1(1),78(4)$

Notes:

$($a$)$ Legal fees include $$15,000$ of estimated fees for a threatened lawsuit against the company.

$($b$)$ Advertising expenses include a $$10,000$ payment to a television station in the United States for commercials promoting

the company's products to the Vancouver market.

$($c$)$ Interest expense includes $$5,000$ of interest paid to the CRA for late instalments.

$($d$)$ Capital cost allowance deductible under paragraph $20(1)($a$)$ is $$165,270.$

$($e$)$ On July $31$ in the current fiscal year, Duncan Ltd$,$ paid $$30,000$ to an agent for services to raise financing. The amount is included in the advertising expense.

$($f$)$ An $$80,000$ bonus is included in salary and wages. The amount will be paid on January $15,$ next year.

$($g$)$ Included in the cost of goods sold is $$50,000$ incurred for the purpose of earning exempt income.

$($h$)$ On January $1$ of the current year, Duncan Ltd$.$ paid $$100,000$ to one of its tenants to cancel a rental lease agreement

because Duncan Lid, required the space for its own business operations. The amount has been included in the rent

expense figure. The lease of property commenced on January $1$ and had five years remaining at that time.

Mr$.$ Duncan has asked you to calculate the company's income from a business for tax purposes for the year ended June $30.$

You are required to provide detailed references to the Canadian Income Tax Act.

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