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AIT805 Ch 10 Assignment Problems

AIT805 Ch 10 Assignment Problems - Chapter 10 Solution...

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Chapter 10 Solution 1 (Basic) (a) Property income (b) Business income (c) Employment income (d) Employment income (e) Business income (f) Property income (g) Employment income (h) Business income (i) Business income (j) Other income (k) Property income (l) Employment income Solution 7 (Advanced) (A) 2006 2007 2008 Par. 3( a ): Income from non-capital sources (≥0): Employment income ........................................................ $ 75,000 $ 80,000 $ 90,000 Property income ............................................................... Nil 3,000 Nil Total par. 3( a ) income ...................................................... $ 75,000 $ 83,000 $ 90,000 Par. 3( b ): Net taxable capital gains (≥0): Taxable capital gains ........................................................ $ 72,000 Nil $ 80,000 Allowable capital losses ................................................... (9,000) (11,250) (40,000) Total par. 3( b ) income ...................................................... $ 63,000 Nil $ 40,000 Par. 3( c ): Par. 3( a ) + par. 3( b ) .......................................................... $ 138,000 $ 83,000 $ 130,000 Par. 3( d ): Losses from non-capital sources and ABIL: Property loss ..................................................................... (4,000) Nil (6,000) ABIL ................................................................................ (18,000) (27,000) Nil Division B income ............................................................................... $ 116,000 $ 56,000 $ 124,000 (B) Deduct: Net capital losses from 2004 (see Schedule 1, Part (I) below) .............................................................................. (21,000) Nil Nil Net capital losses from 2007 (see Schedule 1, Part (I) below) .............................................................................. (11,250) Nil Nil Taxable income .................................................................................... $ 83,750 $ 56,000 $ 124,000 Schedule 1 (I) Net capital losses — Pars. 111(1)( b ) and 111(8)( a ) 2006 2007 2008 Ref. Lesser of: (i) Net TCGs for the year ........ $ 63,000 Nil $ 40,000 Par. 3( b ) (ii) Total net CLs ..................... $ 32,250 Nil Nil (II) Lesser amount ......................... $ 32,250 Nil Nil (II) Loss continuity schedule 2004 2007 Total Ref. Net CL ................................................................................. $ 21,000 $ 11,250 $ 32,250 Utilized in 2006 .................................................................... (21,000) (11,250) (32,250) (I) Available in 2008 ................................................................. Nil Nil Nil 1
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Solution 8 (Advanced) 2007 2008 Par. 3( a ) Income from non-capital sources (non-negative amounts only): Employment income ................................................................ $ 30,000 $ 38,000 Other business income ............................................................. Nil Nil Property income ....................................................................... 10,000 16,000 Other — pension income .......................................................... 7,000 7,000 Income from non-capital sources ............................................. $ 47,000 $ 61,000 Par. 3( b ) Net taxable capital gains (non-negative): Listed personal property (1) ........................................................ $ 500 $ 10,125 Personal-use property (2) ............................................................ 1,000 Nil Other ........................................................................................ 3,000 (10,125) (3) Net taxable capital gains .......................................................... $ 4,500 Nil Par. 3( a ) + par. 3( b ) .................................................................. $ 51,500 $ 61,000 Par. 3( c ) Support payments ............................................................................ $ (7,000) $ (7,000) RRSP (1,000) (3,000) (4) Total par. 3( c ) deductions $ (8,000) $ (10,000) Par. 3( a ) + par. 3( b ) – par. 3( c ) $ 43,500 $ 51,000 Par. 3( d ) Business loss .................................................................................... $ (14,000) $ (23,000) Allowable business investment loss ................................................. (12,000) Rental loss ....................................................................................... (5,000) Division B ............................................................................................................... $ 29,500 $ 11,000 Par. 111(1)( b ) Net capital loss (5) .............................................................. (4,500) Nil Par. 111(1)( a ) Non-capital loss carried forward (6) .................................... (14,400) (381) Taxable income (equal to personal and employment tax credit bases) … ........ $ 10,600 $ 10,619 NOTES TO SOLUTION (1) Listed personal property: 2007 $6,000 – $5,000 (carried forward from 2004 [sec. 41]) $1,000 × 1 / 2 = $500 (2) Personal-use property losses denied. (3) Other capital property — 2008 Allowable capital losses ( 1 / 2 × $45,000) ............................................................................. $ 22,500 Less: allowable business investment loss applied in par. 3( d ) ( 1 / 2 × $24,000) .................... (12,000) $ 10,500 Amount which can be applied under par. 3( b ) ..................................................................... 10,125 Balance which can be carried forward or backward as a net capital loss ............................. $ 375 (4) (a) RRSP contribution deduction for 2007 would be limited by the lesser of: (i) 18% of 2006 earned income ($33,250) = $5,985 (ii) $19,000 Lesser amount ..................................................................................................... $ 5,985 Minus the pension adjustment for 2006 ....................................................................... Nil Net contribution limit .................................................................................................. $ 5,985 Unused RRSP contribution room to be carried forward ($5,985 – $1,000) ................. $ 4,985 2
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(b) RRSP deduction for 2008 would be limited to the lesser of: (i) 18% of 2007 earned income (see below: $12,000) = $2,160
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