Chapter7Solutions

Chapter7Solutions - Chapter 7 - Solution 2 Capital Property...

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Chapter 7 - Solution 2 Capital Property A reserve is available [spar. 40(1)( a )(iii)] for that proportion of the gain that is attributable to proceeds not due in the year. This reserve is restricted to a five-year period and on a cumulative basis at least 20% of the gain must be brought into income each year. 2007 Proceeds of disposition. .................................................................................................... $ 160,000 Adjusted cost base. ........................................................................................................... (4,0000) Gain . ................................................................................................................................. $ 156,000 Reserve — lesser of: (a) $156,000 × $120,000/$160,000 = $117,000 (b) ( 1 / 5 × $156,000) × (4 – 0) = $124,800. ................................................................. (117,000) Capital gain. ...................................................................................................................... $ 39,000 Taxable capital gain ( 1 / 2 )................................................................................................... $ 19,500 2008 Prior year’s reserve. .......................................................................................................... $ 117,000 Reserve — lesser of: (a) $156,000 × $100,000/$160,000 = $97,500 (b) ( 1 / 5 × $156,000) × (4 – 1) = $93,600. ................................................................... (93,600) Capital gain. ...................................................................................................................... $ 23,400 Taxable capital gain ( 1 / 2 )................................................................................................... $ 11,700 2009 Prior year’s reserve. .......................................................................................................... $ 93,600 Reserve — lesser of: (a) $156,000 × $80,000/$160,000 = $78,000 (b) ( 1 / 5 × $156,000) × (4 – 2) = $62,400. ................................................................... (62,400) Capital gain. ...................................................................................................................... $ 31,200 Taxable capital gain ( 1 / 2 )................................................................................................... $ 15,600 2010 Prior year’s reserve. .......................................................................................................... $ 62,400 Reserve — lesser of (a) $156,000 × $60,000/$160,000 = $58,500 (b) ( 1 / 5 × $156,000) × (4 – 3) = $31,200. ................................................................... (31,200)
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This note was uploaded on 09/30/2008 for the course ACCT 360 taught by Professor Jones during the Summer '08 term at Windsor.

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Chapter7Solutions - Chapter 7 - Solution 2 Capital Property...

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