1. Chapter 16 Integration, Refundable Taxes, And Special Incentives For Corporations

2. 2© 2007, Clarence Byrd Inc. Integration Corporation I get the same after tax amount by either route!!!

3. 3© 2007, Clarence Byrd Inc. Dividend Gross Up And Tax Credit Eligible Dividends 45 Percent Gross Up 11/18 Of Gross Up Tax Credit Non-Eligible Dividends 25 Percent Gross UP 2/3 Of Gross Up Tax Credit

4. 4© 2007, Clarence Byrd Inc. If you haven’t covered this material recently – Review the dividend gross up and tax credit procedures in Chapter 9.

5. 5© 2007, Clarence Byrd Inc. Integration Assumptions Combined Federal/Provincial Corporate Tax Rates Combined Federal/Provincial Corporate Tax Rates Eligible Dividends = 31.03 % Eligible Dividends = 31.03 % Non-Eligible Dividends = 20% Non-Eligible Dividends = 20% Provincial Dividend Tax Credit Provincial Dividend Tax Credit Eligible Dividends = 7/18 Eligible Dividends = 7/18 Non-Eligible Dividends = 1/3 Non-Eligible Dividends = 1/3

6. 6© 2007, Clarence Byrd Inc. Actual Corporate Rates Public companies (pay eligible dividend) Public companies (pay eligible dividend) Low: 32 percent in Quebec Low: 32 percent in Quebec High 38.1 percent in PEI and Nova Scotia High 38.1 percent in PEI and Nova Scotia Too high for integration Too high for integration CCPCs (pay non-eligible dividends) CCPCs (pay non-eligible dividends) Low: 16.1 percent in Alberta Low: 16.1 percent in Alberta High: 21.1 percent in Quebec High: 21.1 percent in Quebec On average – integration works On average – integration works

7. 7© 2007, Clarence Byrd Inc. Actual Dividend Tax Credit Lowest: 21 percent of gross up Lowest: 21 percent of gross up Highest: 39 percent of gross up Highest: 39 percent of gross up Effectiveness of integration depends on province Effectiveness of integration depends on province

8. 8© 2007, Clarence Byrd Inc. Tax Basis Shareholders’ Equity Paid Up Capital (PUC) Paid Up Capital (PUC) Based On Legal Stated Capital Based On Legal Stated Capital ITA 89(1) ITA 89(1) Similar To Contributed Capital in Accounting Similar To Contributed Capital in Accounting

9. 9© 2007, Clarence Byrd Inc. Tax Basis Shareholders’ Equity Retained Earnings Retained Earnings Pre-1972 Capital Surplus On Hand Pre-1972 Capital Surplus On Hand Capital Gains Accrued Before 1972 Capital Gains Accrued Before 1972 Realized After 1971 Realized After 1971 Surplus Nothings Surplus Nothings Capital Dividend Account Capital Dividend Account Post-1971 Undistributed Surplus Post-1971 Undistributed Surplus Treatment Of RDTOH (an asset from a tax point of view) Treatment Of RDTOH (an asset from a tax point of view)

10. 10© 2007, Clarence Byrd Inc. Paid Up Capital Importance An investment of after tax funds Can be distributed tax free Note: PUC is not equal to ACB Defined Legal Capital (as per corporate law) Limited number of adjustments

11. 11© 2007, Clarence Byrd Inc. Paid Up Capital Example: J & J issues 1,000 shares of stock on January 1, 2007 for $10,000 ($10 Per Share) and an additional 3,000 shares on December 31, 2008 for $60,000 ($20 Per Share). 1/1/07: PUC = ACB = $10 Per Share 31/12/08: PUC = $70,000 ÷ 4,000 = $17.50 Per Share -Individual buying on December 31, 2008 PUC = $17.50 ACB = $20.00

12. 12© 2007, Clarence Byrd Inc. Capital Dividend Account General Idea General Idea Like RDTOH - A Tracking Mechanism Like RDTOH - A Tracking Mechanism Private Companies Only Private Companies Only With election, balance can be distributed tax free With election, balance can be distributed tax free

13. 13© 2007, Clarence Byrd Inc. Capital Dividend Account Components Untaxed Portion Of Net Capital Gains Capital Dividends Received Untaxed Portion Of CEC Gains Untaxed Life Insurance Proceeds Reduced By Capital Dividends Paid

14. 14© 2007, Clarence Byrd Inc. Use Of Corporate Surplus Cash Dividends Cash Dividends Reduces Post-1971 Undistributed Surplus Reduces Post-1971 Undistributed Surplus Subject To Gross Up And Tax Credit Procedures Subject To Gross Up And Tax Credit Procedures Not Deductible To The Corporation Not Deductible To The Corporation

15. 15© 2007, Clarence Byrd Inc. Use Of Corporate Surplus Stock Dividends Common Stock (100,000 Shares)$1,000,000 Retained Earnings 4,000,000 Total Shareholders’ Equity$5,000,000 A 10 percent stock dividend is declared (FMV = $70) Transfer To PUC - [(100,000)(10%)($70)] = $700,000

16. 16© 2007, Clarence Byrd Inc. Use Of Corporate Surplus Stock Dividends Common Stock (110,000 Shares)$1,700,000 Retained Earnings 3,300,000 Total Shareholders’ Equity$5,000,000 Holder of 100 shares at $60 gets 10 new shares at $70 Taxable Dividend = $700 ACB = ($6,000 + $700)/110 = $60.90

17. 17© 2007, Clarence Byrd Inc. Dividends In Kind Example: Distribute An Investment With A Cost Of $1 Million And A FMV Of $1.5 Million. Recipient: Taxable Dividend Of $1.5 Million Payor: Disposition At $1.5 Million, Capital Gain Of $500,000

18. 18© 2007, Clarence Byrd Inc. ITA 84(1) Deemed Dividend General Idea General Idea PUC Increase In Excess Of Net Asset Increase PUC Increase In Excess Of Net Asset Increase Creates Added Tax Free Distribution Creates Added Tax Free Distribution ITA 53(1)(b) - Addition To ACB Of Shares ITA 53(1)(b) - Addition To ACB Of Shares Exceptions Exceptions Stock Dividends Stock Dividends Shifts Between Classes Shifts Between Classes Conversion Of Contributed Surplus Conversion Of Contributed Surplus

19. 19© 2007, Clarence Byrd Inc. ITA 84(2) Deemed Dividends With winding-up under ITA 88(2): With winding-up under ITA 88(2): ITA 84(2) Deemed Dividend Equals The Excess Of The Amount Distributed Over PUC ITA 84(2) Deemed Dividend Equals The Excess Of The Amount Distributed Over PUC

20. 20© 2007, Clarence Byrd Inc. Components Of 84(2) Dividend ITA 88(2)(b) ITA 88(2)(b) Indicates That ITA 84(2) Deemed Dividend Is Made Up Of: Indicates That ITA 84(2) Deemed Dividend Is Made Up Of: Capital Dividend (If Elected) Capital Dividend (If Elected) Distribution Of Pre-1972 CSOH [Deemed Not To Be A Dividend By 88(2)(b)(ii)] Distribution Of Pre-1972 CSOH [Deemed Not To Be A Dividend By 88(2)(b)(ii)] Residual Is A Taxable Dividend Residual Is A Taxable Dividend

21. 21© 2007, Clarence Byrd Inc. ITA 83(2) Capital Dividend All Dividends Are Taxed If No Election All Dividends Are Taxed If No Election Election (Form T2054) Allows Any Dividend To Be Treated As A Capital Dividend (If Balance Available In Capital Dividend Account) Election (Form T2054) Allows Any Dividend To Be Treated As A Capital Dividend (If Balance Available In Capital Dividend Account) Penalty For Excess Election Penalty For Excess Election Does Not Reduce ACB Of Shares Does Not Reduce ACB Of Shares Does Not Reduce PUC Of Shares Does Not Reduce PUC Of Shares

22. 22© 2007, Clarence Byrd Inc. ITA 84(3) Deemed Dividend On Redemption, Acquisition By Corporation, Or Cancellation Of Shares On Redemption, Acquisition By Corporation, Or Cancellation Of Shares General Idea: If Payment To Shareholder Exceeds PUC, The Excess Is A Deemed Dividend General Idea: If Payment To Shareholder Exceeds PUC, The Excess Is A Deemed Dividend If Payment Exceeds ACB, The Excess Is A Capital Gain If Payment Exceeds ACB, The Excess Is A Capital Gain Remove ITA 84(3) Deemed Dividend From POD under ITA 54 Remove ITA 84(3) Deemed Dividend From POD under ITA 54

23. 23© 2007, Clarence Byrd Inc. ITA 84(3) Example Mr. Jones owns all 5,000 shares of L&L Ltd. The shares have a PUC of $75,000 and his ACB is $40,000. One-half of the shares are redeemed for $55,000. Redemption Price$55,000 PUC [(1/2)($75,000)]( 37,500) ITA 84(3) Deemed Dividend $17,500

24. 24© 2007, Clarence Byrd Inc. ITA 84(3) Example (Cont) Redemption Price $55,000 84(3) Dividend( 17,500) POD $37,500 ACB( 20,000) Capital Gain $17,500

25. 25© 2007, Clarence Byrd Inc. ITA 84(4) Deemed Dividends A Liquidating Dividend Involving a PUC Reduction A Liquidating Dividend Involving a PUC Reduction If Amount Distributed Exceeds PUC, The Excess Is A Deemed Dividend If Amount Distributed Exceeds PUC, The Excess Is A Deemed Dividend

26. 26© 2007, Clarence Byrd Inc. ITA 84(4) Example Company distributes $80 per share. The shares have a PUC Of $60 Per Share. ITA 84(4) Deemed Dividend Of $20 Per Share PUC Down By $60 To Nil ACB Down By $60

27. 27© 2007, Clarence Byrd Inc. ITA 84(4.1) Example If Public Company Entire distribution is treated as deemed dividend Exception if there is a redemption, acquisition, or cancellation of shares

28. 28© 2007, Clarence Byrd Inc.

29. 29© 2007, Clarence Byrd Inc. ITA 129(4) - Aggregate Investment Income Defined Includes: Net Taxable Capital Gains For The Year, Reduced By Any Net Capital Loss Carry Overs Deducted Interest Rents Royalties Excludes: Dividends Deductible In Computing Taxable Income

30. 30© 2007, Clarence Byrd Inc. Additional Refundable Tax On Investment Income (ART) Amount Payable Is 6-2/3% Of Lesser Of: The Corporation’s Aggregate Investment Income The Amount, If Any, By Which The Corporation’s Taxable Income Exceeds The Amount Eligible For The Small Business Deduction

31. 31© 2007, Clarence Byrd Inc. Refundable Part I Tax The Problem Excessive Tax Rates On Flow Through Of A CCPC’s Investment Income Excessive Tax Rates On Flow Through Of A CCPC’s Investment Income With ART, Taxed At Federal Rate Of Just Under 36% [(38% - 10%)(104%) + 6-2/3%]. With ART, Taxed At Federal Rate Of Just Under 36% [(38% - 10%)(104%) + 6-2/3%]. Add Provincial Rates Of 11.5% To 17% Add Provincial Rates Of 11.5% To 17% Total Tax Rate Varies Between 47% And 53% Total Tax Rate Varies Between 47% And 53%

32. 32© 2007, Clarence Byrd Inc. Refundable Part I Tax The Problem $100,000 Of Investment Income Individual Shareholder

33. 33© 2007, Clarence Byrd Inc. Refundable Part I Tax The Solution When When Corporation Distributes Its After Tax Income As Dividends, Part Of Tax Is Refunded Refund Refund Equal To $1 For Each $3 Of Dividends Paid

34. 34© 2007, Clarence Byrd Inc. Example – Part I Refund Corporate Income $100,000 Taxes At 46-2/3% 46,667 46,667 Balance Before Refund $53,333 Refund 26,667 26,667 Maximum Dividend $ 80,000 $26,667 = [(1/3)($80,000)]

35. 35© 2007, Clarence Byrd Inc. Refundable Part IV Tax The Problem $100,000 Investment Income

36. 36© 2007, Clarence Byrd Inc. Refundable Part IV Tax: Liability For Private Corporations Private Corporations Subject Corporations Subject Corporations A Corporation (Other Than A Private Corporation) Resident In Canada And Controlled By, Or For The Benefit Of, An Individual Or Related Group A Corporation (Other Than A Private Corporation) Resident In Canada And Controlled By, Or For The Benefit Of, An Individual Or Related Group For The Purposes Of Part IV Tax, Treated As A Private Corporation For The Purposes Of Part IV Tax, Treated As A Private Corporation

37. 37© 2007, Clarence Byrd Inc. Refundable Part IV Tax Assessment And Refund Assessed Assessed At A Rate Of 33-1/3% Refunded Refunded At A Rate Of $1 For Each $3 Of Dividends Paid

38. 38© 2007, Clarence Byrd Inc. Part IV Refundable Tax Where Applied Dividend Dividend Is Received From An Unconnected Company (Portfolio Dividend) Is Received From A Connected Company, And The Company Paying The Dividend Received A Refund As The Result Of The Payment

39. 39© 2007, Clarence Byrd Inc. Part IV Refundable Tax Connected Corporations Connected Corporations Control (> 50%), or Control (> 50%), or Greater Than: Greater Than: 10% Of Voting, And 10% Of Voting, And 10% FMV Of All 10% FMV Of All

40. 40© 2007, Clarence Byrd Inc. Part IV Refundable Tax Reduce Part IV With Non-Capital Losses However, Uses A Potential Permanent Reduction In Taxes To Reduce Tax Payable That Would Ultimately Be Refunded

41. 41© 2007, Clarence Byrd Inc. Keeping Score: Refundable Dividend Tax On Hand Components Components Opening Balance Opening Balance Refundable Part I Tax Refundable Part I Tax Part IV Tax Part IV Tax Dividend Refund Dividend Refund Closing Balance Closing Balance

42. 42© 2007, Clarence Byrd Inc. Refundable Portion Of Part I Tax RDTOH Definition Limits To The Least Of: ITA 129(3)(a)(i) – Investment Income Limit ITA 129(3)(a)(ii) – Taxable Income Limit ITA 129(3)(a)(iii) – Tax Payable Limit

43. 43© 2007, Clarence Byrd Inc. ITA 129 (3)(a)(i) Determined By Formula A-B, Where Determined By Formula A-B, Where A Is 26-2/3% Of Aggregate Investment Income A Is 26-2/3% Of Aggregate Investment Income B Is The Amount, If Any, By Which The Non-Business FTC Exceeds 9-1/3% Of Foreign Income B Is The Amount, If Any, By Which The Non-Business FTC Exceeds 9-1/3% Of Foreign Income

44. 44© 2007, Clarence Byrd Inc. ITA 129(3)(a)(ii) 26-2/3% Of The Amount, If Any, By Which Taxable Income Exceeds The Total Of: 26-2/3% Of The Amount, If Any, By Which Taxable Income Exceeds The Total Of: Amount Eligible For The Small Business Deduction Amount Eligible For The Small Business Deduction 25/9 Of Non-Business FTC 25/9 Of Non-Business FTC 3 Times Business FTC 3 Times Business FTC

45. 45© 2007, Clarence Byrd Inc. ITA 129(3)(a)(iii) Tax Payable Under Part I Determined Without Corporate Surtax Tax Payable Under Part I Determined Without Corporate Surtax

46. 46© 2007, Clarence Byrd Inc. Dividend Refund Equal To The Lesser Of: Balance In RDTOH Account At The Year End 1/3 Of All Dividends Subject To Tax Paid During The Year

47. 47© 2007, Clarence Byrd Inc. Example Basic Data Fortune Ltd. is a Canadian controlled private corporation. Based on the formula in ITR 402, 90 percent of the Company’s income is earned in a province. The following information is available for the year ending December 31, 2007: Fortune Ltd. is a Canadian controlled private corporation. Based on the formula in ITR 402, 90 percent of the Company’s income is earned in a province. The following information is available for the year ending December 31, 2007:

48. 48© 2007, Clarence Byrd Inc. Basic Data Canadian Source Investment Income (Includes $25,000 In Taxable Capital Gains)$100,000 Gross Foreign Investment Income (15 Percent Withheld) 20,000 Gross Foreign Business Income (15 Percent Withheld) 10,000 Active Business Income (No Associated Companies) 150,000 Portfolio Dividends Received 30,000 Net Income For Tax Purposes $310,000 Portfolio Dividends ( 30,000) Net Capital Loss From Preceding Year Deducted ( 15,000) Taxable Income$265,000

49. 49© 2007, Clarence Byrd Inc. Basic Data RDTOH - December 31, 2006$110,000 RDTOH - December 31, 2006$110,000 Dividend Refund For 2006 20,000 Dividend Refund For 2006 20,000 Taxable Dividends Paid During 2007 40,000 Taxable Dividends Paid During 2007 40,000 Aggregate investment income for Fortune Ltd. is equal to $105,000 ($100,000 + $20,000 - $15,000). Aggregate investment income for Fortune Ltd. is equal to $105,000 ($100,000 + $20,000 - $15,000).

50. 50© 2007, Clarence Byrd Inc. Part I Tax Payable Base Amount Of Part I Tax [(38%)($265,000)]$100,700 Surtax [(4%)(28%)($265,000)] 2,968 ART: Equal To The Lesser Of: [(6-2/3%)($265,000 - $150,000)] = $7,667 [(6-2/3%)($100,000 + $20,000 - $15,000)] = $7,000 7,000 Federal Tax Abatement [(10%)(90%)($265,000)]( 23,850) Foreign Non-Business Tax Credit( 3,000) Foreign Business Tax Credit ( 1,500)

51. 51© 2007, Clarence Byrd Inc. Small Business Deduction The small business deduction would be equal to 16 percent of the least of: The small business deduction would be equal to 16 percent of the least of: 1.Active Business Income$150,000 2.Taxable Income$265,000 Deduct: [(10/3)($3,000 Non-Business FTC)]( 10,000) [(10/3)($3,000 Non-Business FTC)]( 10,000) [(3)($1,500 Business FTC)] ( 4,500) [(3)($1,500 Business FTC)] ( 4,500) Total $250,500 3.Annual Business Limit$400,000 The least of these figures is $150,000, providing for a small business deduction of $24,000 [(16%)($150,000)].

52. 52© 2007, Clarence Byrd Inc. Part I Tax Payable Base Amount Of Part I Tax [(38%)($265,000)]$100,700 Surtax [(4%)(28%)($265,000)] 2,968 ART: Equal To The Lesser Of: [(6-2/3%)($265,000 - $150,000)] = $7,667 [(6-2/3%)($100,000 + $20,000 - $15,000)] = $7,000 7,000 Federal Tax Abatement [(10%)(90%)($265,000)]( 23,850) Foreign Non-Business Tax Credit( 3,000) Foreign Business Tax Credit ( 1,500) Small Business Deduction( 24,000)

53. 53© 2007, Clarence Byrd Inc. General Rate Reduction The general rate reduction under ITA 123.4(2) would be calculated as follows: Taxable Income $265,000 Amount Eligible For SBD ( 150,000) Aggregate Investment Income ($100,000 + $20,000 - $15,000)( 105,000) Full Rate Taxable Income $ 10,000 Rate7% ITA 123.4(2) Reduction $ 700

54. 54© 2007, Clarence Byrd Inc. Part I Tax Payable Base Amount Of Part I Tax [(38%)($265,000)]$100,700 Surtax [(4%)(28%)($265,000)] 2,968 ART: Equal To The Lesser Of: [(6-2/3%)($265,000 - $150,000)] = $7,667 [(6-2/3%)($100,000 + $20,000 - $15,000)] = $7,000 7,000 Federal Tax Abatement [(10%)(90%)($265,000)]( 23,850) Foreign Non-Business Tax Credit( 3,000) Foreign Business Tax Credit ( 1,500) Small Business Deduction( 24,000) General Rate Reduction For CCPCs ( 700) Part I Tax Payable $ 57,618

55. 55© 2007, Clarence Byrd Inc. Part I Refundable 26-2/3% Of Aggregate Investment Income [(26-2/3%)($105,000)] $28,000 Deduct Excess Of: Foreign Non-Business Tax Credit$3,000 Over 9-1/3% Of Foreign Investment Income [(9-1/3%)($20,000)]( 1,867) ( 1,133) ITA 129(3)(a)(i) $26,867

56. 56© 2007, Clarence Byrd Inc. Part I Refundable Taxable Income$265,000 Deduct: Amount Eligible For SBD ($150,000) [(25/9)($3,000 Non-Business FTC)] ( 8,333) [(3)($1,500 Business FTC)] ( 4,500)( 162,833) Total$102,167 Rate26-2/3% ITA 129(3)(a)(ii)$ 27,245

57. 57© 2007, Clarence Byrd Inc. Part I Refundable ITA 129(3)(a)(iii) Adjusted Part I ITA 129(3)(a)(iii) Adjusted Part I Tax Payable ($57,618 - $2,968)$ 54,650 The refundable portion of Part I tax is equal to $26,867, which is the least of the preceding three amounts The refundable portion of Part I tax is equal to $26,867, which is the least of the preceding three amounts

58. 58© 2007, Clarence Byrd Inc. RDTOH Balance The Part IV tax would be $10,000, one-third of the $30,000 in portfolio dividends received. Given this, the balance in the RDTOH account at the end of the year is as follows: The Part IV tax would be $10,000, one-third of the $30,000 in portfolio dividends received. Given this, the balance in the RDTOH account at the end of the year is as follows: RDTOH - End Of Preceding Year $110,000 Deduct: Dividend Refund For The Preceding Year ( 20,000)$ 90,000 Refundable Portion Of Part I Tax $ 26,867 Part IV Tax Payable [( 33-1/3%)($30,000)] 10,000 36,867 RDTOH - December 31, 2007$126,867

59. 59© 2007, Clarence Byrd Inc. Dividend Refund The dividend refund for the year would be $13,333, the lesser of: The dividend refund for the year would be $13,333, the lesser of: One-Third Of Taxable Dividends Paid ($40,000 ÷ 3) $13,333 One-Third Of Taxable Dividends Paid ($40,000 ÷ 3) $13,333 RDTOH Balance December 31, 2007$126,867 RDTOH Balance December 31, 2007$126,867

60. 60© 2007, Clarence Byrd Inc. Federal Tax Payable Using the preceding information, the total federal Tax Payable for Fortune Ltd. is calculated as follows: Part I Tax Payable$57,618 Part IV Tax Payable 10,000 Dividend Refund ( 13,333) Federal Tax Payable$54,285

61. 61© 2007, Clarence Byrd Inc. Eligible Dividends Any dividend that is designated as such. Any dividend that is designated as such. Qualifies for enhanced 45 percent gross up. Qualifies for enhanced 45 percent gross up. Receives dividend tax credit of 11/18 of the gross up. Receives dividend tax credit of 11/18 of the gross up. Reduces maximum federal rate on dividends to about 15 percent. Reduces maximum federal rate on dividends to about 15 percent.

62. 62© 2007, Clarence Byrd Inc. Tax On Excessive Election For CCPC – A designation that exceeds General Rate Income Pool (GRIP). For Public Company – A designation that leaves a positive Low Rate Income Pool (LRIP). Excess taxed at 20 percent. If artificial manipulation – Tax at 30 percent on the entire dividend (not just excess)

63. 63© 2007, Clarence Byrd Inc. Basic Approach CCPCs CCPCs Income eligible for SBD Income eligible for SBD Investment income eligible for refund Investment income eligible for refund Assume most dividends are non-eligible Assume most dividends are non-eligible Exceptions in GRIP Exceptions in GRIP Public Companies Most income taxed at general rates Assume most dividends are eligible Exceptions in LRIP

64. 64© 2007, Clarence Byrd Inc. CCPCs and their GRIP GRIP = C + [(68%)(D – E – F)] + G + H - I C = GRIP at end of preceding year D = Taxable Income for the year E = Amount eligible for SBD for the year F = Aggregate investment income for the year G = Eligible dividends received during the year H = Adjustments for amalgamations and wind ups I = Eligible dividends paid during the preceding year

65. 65© 2007, Clarence Byrd Inc. Designation By CCPC To the extent of the GRIP balance: To the extent of the GRIP balance: Dividends can be designated as eligible. Dividends can be designated as eligible.

66. 66© 2007, Clarence Byrd Inc. Non-CCPCs and their LRIP LRIP = (A + B + C + D + F) – (G + H) A = LRIP at end of preceding year B = Non-eligible dividends received for the year C = Additions for corporate reorganizations D = Adjustment if CCPC in some preceding year E = Adjustment if credit union in some preceding year F = Adjustment if investment company in some preceding year G = Non-eligible dividends paid during the year H = Excess election during year

67. 67© 2007, Clarence Byrd Inc. Non-Eligible Dividends: Non-CCPC Dividend paid when there is a positive LRIP balance: Dividend paid when there is a positive LRIP balance: Should be non-eligible. Should be non-eligible. If designated – will be subject to tax on excess designation. If designated – will be subject to tax on excess designation.

68. 68© 2007, Clarence Byrd Inc.