4561 Lecture 6 June 4 10

4561 Lecture 6 June 4 10 - 4561-611.LECTURE 6: INVESTMENTS...

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Unformatted text preview: 4561-611.LECTURE 6: INVESTMENTS AND CAPITAL GAINS AND LOSSES PART I last updated June 4, 2010 -change in redReadings ADMS 3520 Lecture 3 Notes, Item 3: print and bringFIT Ch. 7 (ignore supplemental notes)Income Tax Act Sections 3, 38-53 (as covered in the lecture notes only), 70 RecommendAll Chapter 7 Multiple choice questions, Exercises 1&2 (on principal residences) and 3&4 (on PUP and LPP)Problem Set 6: Chapter 7, Assignment Problems 2 (Loof Lirpa: capital gain and income reserves), 3(Doug Hart: three principal residences)Take up Exercises 3 and 4.We focus more on stock transactions next week when we do 2 Chapter 7 problems on stock transactions. You must bring your Text and Act to each lecture.You are expected to do the problems in the Problem Set before class and bring your solutions to class. Include section references in your solutionsThese notes following the ordering and headings in Chapters 7 of FIT. The essential points that you need to know are covered. The topics covered in ADMS 3520 Lecture 3 is marked with an asterisk*. Overview 7,000History 7,010Capital Receipt vs. Income Receipt Revisited* 7,020Terminology 7,040Proceeds of Disposition* Adjusted Cost Base* Selling Costs *Principal Residence Exemption* Capital Gains Reserve Capital Gain or Capital Loss* Taxable Capital Gain*Allowable Capital Loss*Business Investment Loss/Allowable Business Investment Loss Capital Gains Deduction 7,050Canadian Securities Election* 7,060Avoidance Skip 7,070Joanne Magee [jmagee@yorku.ca]4561-62General Rules 7,100Computation of Capital Gains and Capital Losses 7,110- Proceeds of Disposition* 7,115- Adjusted Cost Base and capital cost* 7,120- Reserves 7,125- Adjustments to the Cost Base 7,130Specific Provisions 7,200Principal Residence Exemption* 7,210Personal Use Property Rules* 7,220Listed Personal Property* 7,230Pooling Of Identical Assets Purchased After 1971* 7,240Disposition of Shares Acquired Under a Stock Option 7,250Cost Of Certain Properties - Stock Dividends 7,270Adjustments to Cost Base 7,280Superficial Loss Rules* 7,290 Computational RulesSection 3 Revisited 7,310Allowable Business Investment Losses (ABILs) 7,3202.OVERVIEW 7,0002.1HISTORY 7,010 Capital gains were tax free in Canada prior to 1972 (hence Canada was a tax haven for capital gains prior to 1972). After 1971 capital gains were partially taxable (and capital losses were partially allowable) in Canada at the following inclusion rates:1972 19871/21988 and 19892/31990 February 27, 20003/4February 28, 2000 October 17, 20002/3October 18, 2000 present1/22.2CAPITAL VS. INCOME 7,020 some covered in ADMS 3520The common law tests developed by the courts look at whether the taxpayer intended to hold the asset as a capital asset or resell the property at a profit (like inventory)Joanne Magee [jmagee@yorku.ca]4561-63Factors used to assess (primary and secondary) intention are: Holding period Relationship to taxpayer's business...
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4561 Lecture 6 June 4 10 - 4561-611.LECTURE 6: INVESTMENTS...

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