{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Accg_Tax_Notes_C8 - CHAPTER EIGHT CAPITAL GAINS THE FINER...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
CHAPTER EIGHT - CAPITAL GAINS: THE FINER POINTS 1. EXCHANGES (REPLACEMENT) OF PROPERTY - Sections 13 and 44 permit the deferral of some or all of the recapture and capital gains, if any, resulting from the disposition of property which is replaced by property used for the same or similar purpose in the same or similar business . (not necessarily in same CCA class) Specific conditions must be satisfied and an election must be filed in the tax year the property is replaced. (An election under one of these sections is deemed to be an election under the other. ie. both must be applied if applicable.) 2 types of dispositions qualify for this election: 1. Involuntary disposition of property (lost, stolen, destroyed, expropriated, bankruptcy) 2. Voluntary disposition of “former business property” (land & buildings, limited-period franchises or licences) The disposition is deemed to have occurred only when the proceeds are “receivable”. With respect to involuntary dispositions this is the day the taxpayer agrees to the amount of compensation (no more than 2 years after date of loss) or the date compensation is determined by a court. To qualify for the election, the replacement property must be acquired by: a. 24 months after the end of the year of involuntary disposition. b. 12 months after the end of the year of voluntary disposition. S44 deferral - In the year of disposition, the taxpayer may choose to: 1. Recognize the usual capital gain, if any, or 2. Elect to report the capital gain as the excess, if any, of the proceeds of disposition over the cost of the replacement property, if this amount is less than the usual capital gain. (This will be a lesser amount provided cost of replacement exceeds ACB of old property.) The ACB of the replacement property will be reduced by the amount of the deferred capital gain. (The deferred capital gain is equal to the amount by which 1. exceeds 2. above.) S13(4) deferral - For CCA purposes, if the asset is replaced before year end, the cost of the replacement property (reduced by the amount of any deferred capital gain under S44) will normally mitigate any recapture. However, where the replacement property is placed in a different CCA class or is not acquired by year end, a S13(4) election is available. This election serves to reduce the usual recapture by an amount not exceeding the cost of the replacement property. Where 13(4) is elected, the cost of the replacement property added to the appropriate CCA class will be reduced by the amount of the deferred recapture, consistent with the outcome had the replacement asset been added to the same class in the year of disposition. If the replacement property is not acquired in the same year as the disposition is recorded, the taxpayer recognizes the usual capital gain and any recapture, in the year of disposition. If the replacement property is then acquired within the allowed time frame, an amendment is requested for the year of disposition facilitating the above-noted deferrals.
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
2. ALLOCATION OF PROCEEDS BETWEEN LAND AND BUILDING:
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern