Acc742 Lecture 6 Property Income Fall 2010

Acc742 Lecture 6 Property Income Fall 2010 -...

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1 Income From Property Chapter 6
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2 Income from Property Part I Division B,  subdivision b and  subdivision f
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3 Income From Property Return on invested capital Little effort expended Examples: Dividends Interest Rent Royalties Does not include capital gains or losses (9(3))
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4 Income from Property Most of the rules in subdivision b of  Division B apply to both income from  business and property Rules in subdivision f of Division B  provide rules regarding property  income, i.e. attribution rules, deemed  interest benefit
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5 Interest Income Interest not defined in Act but defined by courts 12(3) - corporations accrue as for GAAP 12(4) - individuals interest received plus interest accrued on each anniversary date but not yet received Anniversary date based on issue date not purchase date Anniversary   date [ITA 12(11)] =   1 year after the issue date and every successive one year interval
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6 Interest Income 12(1)(c) – must include interest  received to extent not previously  included under accrual method Compounding-interest debt obligations  may be at disadvantage since need to  accrue but no cash to pay tax
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7 Interest Income - Example: Purchase a $1,000 6% 2 year compound interest CSB November 1, 2009. How much interest does corporation and how much does individual report yearly?
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8 Interest Income - Example: Corporation Individual 2009 $10 0 2010  $60.60 $60 2011 $53. $63.60
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9 Other Interest Treasury Bills- issued at discount and  no interest charged, discount  considered to be interest Bonds – if sold interest accrued to date of sale included in  income of vendor (20(14)(a)) and  purchaser allowed to deduct this amount  when he receives the interest 20(14)(b))
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10 Dividends 12(1)(j) - requires dividends from corporations resident in Canada to be included in income 82(1) - stipulates amount to be included for individuals add gross-up; will receive tax credit on computation of tax corporations have no gross-up and no DTC; (may deduct in calculating taxable income in Division C)
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11 Dividends Will see later that the system trying to relieve  double taxation Same tax should be paid whether income  received through corporation or directly by  individual Gross-up ensures individual includes amount  = pre-tax income of corporation Dividend tax credit equals tax paid by  corporation
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12 Dividends- from CCPC’s Active Business  Income taxed at  low  rates or from  investment income Individual must include dividend (82(1) (a)(i)) plus 25% gross-up (82(1)(b)(i)) Gets 16.67% of dividends paid as tax  credit (121(a) is 2/3 x 25%)
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Dividends –from public corporation or  CCPC taxed at general corporate rates
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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 6 Property Income Fall 2010 -...

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