Homework Problem 7-3

# Homework Problem 7-3 - 15,200 Other Expenses 16,000...

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Solution to Problem 7-3 Facts : Mr. Stanton owns 4 revenue properties: Cost Class UCC Sale 1. 18 Prince St. \$42,000 3 (5%) \$60,000 2. 4 McManus Street \$45,000 3 (5%) \$50,000 3. 94 George St. \$850,000 3 (5%) \$550,000 4. 125 West Street \$102,000 1 (4%) \$98,000 Mr. Stanton also owns furniture (Class 8 @ 20%), for use at 18 Prince Street. It was purchased for \$15,000, has a UCC of \$8,000 and was sold for \$5,000. Information on the rental properties: 18 Prince St 4 McManus St 94 George St. 125 West St Total Rents \$6,000 \$5,000 \$42,000 \$10,000 \$63,000 Interest \$1,750 \$650 \$7,800 \$5,000 \$15,200 Property Tax \$1,200 \$1,550 \$5,200 \$1,750 \$9,700 Other Expenses (excluding CCA) \$1,000 \$2,500 \$8,500 \$4,000 \$16,000 Calculate Mr. Stanton’s Net Rental Income. Specify the amount of CCA that should be taken for each building.

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Mr. Stanton’s Rental Income before CCA: Rental Revenues \$63,000 Less Expenses: Property Taxes \$ 9,700 Interest Charges
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Unformatted text preview: 15,200 Other Expenses 16,000 (40,900) Terminal Loss on Furniture: (UCC \$8,000 - \$5,000 Proceeds) ( 3,000 ) Income Before CCA \$19,100 Maximum CCA on Buildings: McManus (\$50,000 - \$42,000)(5%) \$ 400 George (\$550,000)(5%) 27,500 West (\$98,000)(4%) 3,920 Maximum possible CCA \$31,820 (19,100 ) Net Rental Income Nil Note: 18 Prince Street and 4 McManus St are grouped into the same capital cost pool because each was purchased for less than \$50,000. Thus, when 18 Prince Street was sold, the lower of cost or proceeds is deducted from the pool. However, there is no recapture of CCA because there remains an asset in the pool. There will be a capital gain on 18 Prince Street because it was purchased for \$42,000 and sold for \$60,000. Half of the \$18,000 gain would be included on the income tax return....
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## This note was uploaded on 02/18/2011 for the course ECON 101 taught by Professor Professor during the Spring '11 term at American University of Antigua.

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Homework Problem 7-3 - 15,200 Other Expenses 16,000...

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