Capital tax election of associated group agreement for allocation of taxable capital deduction

Program(s) affected: T2 Document created: August 30, 2005 Tax year(s): 2005 Document last modified: October 27, 2005 Version(s): 8.32 Problem status: Fixed in 8.35

Why is DT Max not calculating the net deduction properly on Ontario schedule 591?

Per the original specifications received from the Ontario Ministry of Finance, DT Max is using the taxpayer's tax effect (TE) in the calculation of the net deduction (ND) for each associated corporation, whereas each associated corporation should calculate the tax effect of its own taxable capital deduction (TCD). The tax effect calculated by each associated group will be used in the calculation of the net deduction.

As a workaround, use Net-Alloc in each associated corporation's Related-Party group to enter the accurate allocation of net deduction (AND) for each associated corporation.

In a situation where the amount automatically calculated by DT Max for the taxpayer's allocation of net deduction is lower than expected, the following override must also be performed: Use the keyword Override, select Ontario CT-23, then enter 1245 in the keyword Field-Data. Finally, enter the correct capital tax deduction amount relating to the taxpayer next to the "$" sign.

The correct amount should appear in field 995 of page 12 of the CT23.

Please note that DT Max version 8.35 calculates the net deduction properly but in compliance with instructions from the Ontario Ministry of Finance, schedule 591 has not yet been updated to reflect the changes.