acc742 lecture 4 business income fall 2010

acc742 lecture 4 business income fall 2010 - Chapter 4...

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Unformatted text preview: Chapter 4 Income From Business Part I Division B • Subdivision a – employment income • Subdivision b – Income from Business • Sections 9-37 Determination of income S. 4 – general rule for determining taxpayer’s income or loss from particular source General rule – only deductions from particular source can be deducted against income from that source Income From Business Subdivision b ITA 9 through 37.3 • Inclusions: • 9 - income or loss from a business • 10 - Inventories • 12 – Income inclusions • Deductions: • 18 - General Limitations re deductions • 19 - Limit on advertising expenses • 20 - Specific Deductions • 37- Scientific Research and Experimental Development Income From Business Subdivision b Looking at business income in s. 9 • What is business profit? • Generally start with GAAP (unless there is another “truer” picture) • Exclude capital items (gains or losses on disposal, amortization etc) • Adjust for items provided by ITA The Role of GAAP IFRS will be adopted by public companies by 2011 As a result, GAAP will refer to IFRS for public entities and GAAP will refer to Cdn GAAP for private enterprises Income From Business Start with profit per s. 9 S. 12 – adds amounts required by tax not required under GAAP S. 18 – discuss expenses must have been included for purposes of gaining or producing income Disallows certain expenses S. 20 – expenses specifically allowed by the Act to be deductible S. 67 – outside of subdivision b but is a general provision that ensures only reasonable expenses deductible Income from Business Income not taxed on a consolidated or equity basis Each legal entity required to file own return Adjustments may be required for these types of income Business Income To adjust GAAP statements Must know how treated for accounting purposes Adjustments are mainly add backs (i.e. not deductible for tax) If treatment same for both tax and accounting no adjustment needed Adjustments done on T2S(1) form Business Income vs Capital Receipt Need to know whether amount is on account of capital or business income Treatment and deductions different Criteria Relation to other business activities Nature of asset (capital or inventory item) Frequency of transaction (how often done in past) Length of period of ownership Additional work done to dispose of asset Circumstances surrounding disposition Corporate object Intention Other relevant factors See Exhibit 4-1 Textbook Income From Business...
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This note was uploaded on 12/14/2010 for the course ACC 742 taught by Professor Sydor during the Fall '10 term at Ryerson.

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acc742 lecture 4 business income fall 2010 - Chapter 4...

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