ACC 742 Lecture 7 Capital Gains Fall 2010

ACC 742 Lecture 7 Capital Gains Fall 2010 - CHAPTER7 1...

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CHAPTER 7 Capital Gains: An Introduction 1
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`CAPITAL GAINS Looking at Division B, subdivision c Subdivision c is short subdivision Starts with s. 38 and ends with section 55 2
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CAPITAL GAINS 40(1) - Capital gain or loss Proceeds of disposition (54) less Adjusted Cost Base (54) less  Expenses of disposition  less Reserve  (for cash not received) less Exemptions  (principal residence) Plus  Last year’s reserve 3
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CAPITAL GAINS 38(a) -  taxable   capital gain  = current  year’s percentage of capital gain 38(b) -  allowable capital loss  = current  year’s percentage of capital loss 38(c) -  allowable business investment  loss  = current year’s percentage of business  investment loss   4
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CAPITAL GAINS INCLUSION RATES 1972-1987 rate was 50% 1988-1989 rate was 66 2/3% 1990 to Feb. 27, 2000 rate was 75% Feb. 28, 2000 to October 17, 2000 rate was 66 2/3% October 18, 2000 on rate is 50% 5
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CAPITAL PROPERTY Can be: Personal Use Property (PUP) – property owned for  personal enjoyment of taxpayer or related person Listed Personal Property (LPP) – separate category  of LPP – only items defined in s. 54 Other Property – anything else purchased for earning  income – includes business and capital assets 6
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CAPITAL LOSSES 39(1)(b) - Capital losses on  depreciable property  deemed to be  nil 40(2)(g) - Capital loss on disposal of  personal use  property  deemed to be  nil  (except for losses on  Listed Personal Property ) 7
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BUSINESS INVESTMENT LOSS BIL - Business investment loss 39(1) (c) = capital loss on sale of shares or debt in a  CCPC that is a “small business  corporation” Small business corporation defined in 248  - “all or substantially all” assets used to  carry on active business in Canada (or  indirectly through shares or debt in  another small business corporation 8
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CAPITAL GAINS DEDUCTION  110.6 Till Feb. 22, 1994 - lifetime deduction of  up to $100,000 capital gains On that date could elect deemed  disposition to increase ACB Still have $375,000 (after March 19, 2007)  taxable capital gains deduction ($750,000  capital gains exemption) on qualifying  shares of small business corporation and  certain farming property 9
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ELECTION RE: DISPOSITION  OF CANADIAN SECURITIES  39(4) Can elect to treat dispositions of “Canadian  securities” as capital receipts Lifetime election “Dealer in securities” cannot make this election –  determine if dealer by present and past trading  activities Election is good if have gains but not if sustain  lots of losses 10
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PROCEEDS OF DISPOSITION Defined in 54
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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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ACC 742 Lecture 7 Capital Gains Fall 2010 - CHAPTER7 1...

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