What is Business Income•Covered in ITA 9 –37.3•These sections also cover property income, but there are differences in how these two sources of income are calculated.•Business income comes from a profession, calling, trade, manufacture or undertaking of any kind whatever, but does not include an office or employment•Property income comes from buying and holding an asset as an investment. The asset could be depreciable or not (eg a building, or land)
Business Income•Compared to employment income–Many more deductions available as discussed earlier•Compared to property income (Active vs. Passive)–Becomes more important for corporations which have a lower tax rate for business income than for property income. Therefore, we must be able to distinguish. If I own one rental property, it’s property income, if I own 50, it’s probably business income.•Compared to capital gains–Similar distinction to that discussed above under property income. Is important because of the special tax treatment afforded capital gains and losses.Complete Exercise Six-1 on page 228
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