Schedule 11 Adjustment - Line 11

CRA emailed the following message to software developers. This change cannot be found on the T1 Guide.

This year, we would like to bring to your attention the calculation of line 11 on the federal schedule 11 only for those taxpayers who have large amounts of Tuition, Education and Textbook amounts and have income that exceeds the first income threshold on schedule 1.

In accordance with legislation, the calculation at line 11 on the federal schedule 11 and the equivalent lines on the provincial forms are as follows:
Fed. or Prov. Tax on Taxable Income* divided by lowest Fed. or Prov. Tax Rate

*Tax on Taxable Income is:

Line 34 on Federal Schedule 1
Line 38 on the NU, BC, ON and NL 428
Line 42 on the YK428
Line 40 on the SK and MB 428
Line 37 on the NWT and NB 428
Line 30 on the AB428
Line 39 on the PEI and NS 428

Our commentary:

The above request has been implemented in VisualTax in the first release (Jan 31, 2009) and also in the draft version prior to it. In previous years, line 11 was always equal to taxable income, Line 260.

Support of this change is in the Income Tax Act, in particular subsection 118.5(1). It is not really a change, but it seems to be CRA's correct application of the Income Tax Act.