Chapter8Solutions

Chapter8Solutions - Chapter 8 - Solution 2 This situation...

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Unformatted text preview: Chapter 8 - Solution 2 This situation involves a voluntary disposition of a former business property in respect of land and building, as well as a disposition of property not eligible for a rollover. Raymond must replace the land and building within one taxation year of the end of the December 31, 2007 year (i.e., the taxation year of the disposition), in order to obtain the benefits of the rollover. (A) 2007 income Subdivision b Par. 12(1)( d ) Last years reserve............................................................................................. $ 1,300 Sec. 22 $6,000 $10,000............................................................................................... (4,000) Sec. 23 $5,200 $7,000................................................................................................. (1,800) Sec. 13 Recapture Class 3 ($62,000 $28,000) ........................................................ 34,000 Class 8 ($1,200 $300) ............................................................... 900 Class 10 ($4,000 $800) ............................................................. 3,200 Sec. 14 2 / 3 3 / 4 $52,000 .............................................................................................. 26,000 Taxable capital gain Subdivision c Land ($120,000 $65,000) $55,000 1 / 2 ......................................................... 27,500 Building ($170,000 $62,000) $108,000 1 / 2 ....................................................... 54,000 Equipment Class 8 (($3,000 $1,200) 1 / 2 .................................................................... 900 Class 10 ........................................................................................................ Nil $ 142,000 (B) 2007 amended tax return Section 44 election on capital gains TCG on land: Lesser of: (a) $55,000 CG (above) (b) ($120,000 $105,000) = $15,000 - $15,000 1 / 2 ............................................ $ 7,500 ACB [par. 44(1)( f )] = $105,000 ($55,000 $15,000) = $65,000 TCG on building: Lesser of: (a) $108,000 CG (above) (b) $170,000 $220,000 = Nil.............................................................................. Nil ACB = $220,000 ($108,000 Nil) = $112,000 Note from the capital gain calculation for the building that up to $50,000 (i.e., $220,000 $170,000) could be added to the proceeds of the building before there is an excess over replacement cost. This determines the room for a reallocation under subsection 44(6). Subsection 13(4) election on recapture Cl. 3: 5% Building: UCC January 1, 2007 ............................................................................................................ $ 28,000 Less: lesser of [par. 13(4)( c )]: P of D ........................................................................ $170,000 Capital cost................................................................ 62,000...
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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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Chapter8Solutions - Chapter 8 - Solution 2 This situation...

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