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Unformatted text preview: Lecture 7 IGNORE -Non-arm’s length transfers- pages 342-349 CAPITAL GAINS AND LOSSES-Chapter 8 -Deemed dispositions pages -358-364 Read only - Foreign currencies -pages 370 -372 1. Background Until 1972, no income tax levied on capital gains. Capital gains tax regime that became effective January 1, 1972 was a compromise between 2 views as to whether capital gains should be taxed (inequities in the taxation system versus the inflation component of a capital gain and the need to replace assets of a going concern) The compromise was that only 50% of the capital gain would be taxable and 50% of capital losses would be allowable. In 1985, complex ITA provisions were enacted whereby an individual Canadian resident could enjoy over his lifetime, an exemption for capital gains. By 1994, the general tax-free capital gains exemption was $100,000 and $500,000 for certain specific assets. The general capital gains tax exemption of $100,000 was abolished in 1994. However, in 1994, taxpayers were offered an opportunity of an election to deem a disposition of capital property up to their fair market value, so as to trigger a capital gain which could be offset by the $100,000 capital gain exemption, thus resulting in a nil capital gain and establishing a higher cost basis for any future actual dispositions . However, the disposal of certain assets continue to be eligible for a “super” tax-free capital gain exemption of $750,000 in 2010., These special assets are: i) shares or debt of a qualifying small business corporation , ii) qualifying farm property ; iii) qualifying fishing properties The taxable capital gains inclusion rate has changed over the years, as follows: 1972 to 1987 - 50% Feb. 28/00 to Oct. 17/00-66 2/3% 1988 to 1989- 66 2/3% Oct. 18/00 to Present-50% 1990 to Feb. 27/00 - 75% For 2000, effectively, there were 3 different inclusion rates. It is important to know the inclusion rate of prior years, to properly calculate the amount of...
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This note was uploaded on 01/24/2011 for the course ACCO 330 taught by Professor Mastromonaco during the Fall '10 term at Concordia Canada.
- Fall '10