3520-6- updated 2009-jfth

3520-6- updated 2009-jfth - 3520-6: Last updated on...

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Unformatted text preview: 3520-6: Last updated on 10/21/091-111Lecture 6: Taxable Income and Tax for Individuals1.1CoverageExercises 3-1 to 3-9, 3-11, 3-12, 3-14 to 3-21Self-Study Problem 3-1Self-Study Problem 3-2Ignore the standby charge and the operating cost benefitSelf-Study Problem 10-3 and 10-42Overview of Computation of Taxable Income and Tax for IndividualsThe basic calculation of taxable income and tax for individuals is as follows: Division B Net Income - Division C Deductions = Taxable Income x Tax Rates = Tax owing (before tax credits)- Tax Credits= Federal Tax+ Provincial Income Tax Total Income Tax 3Division C Deductions [CTP 3-6 to 3-15]3.1ITA 110(1)(d), (d.1) Stock option deductiondeduction for 50% of ITA section 7 stock option benefit (see lecture 2 notes)3.2ITA 110(1)(f) Deduction for social assistance and other similar paymentsPayments covered are: welfare; workers compensation, guaranteed income supplement (GIS)These payments are included in net income under other income [ITA 56(1)(a),(u) & (v)] but are not included in taxable income Therefore they are not taxed but are taken into consideration in the computation of net income (which can affect various tax credits and benefits)3.3ITA 110(1)(j) Home relocation loan deduction for dwelling at least 40 km closer to the new work location [ITA 248(1)], equal to lesser ofthe employment income benefit, calculated by applying the prescribed interest rate that is applicable to each quarter that the loan is outstanding [ITA 80.4(1)(a)]. Note: when computing the prescribed interest benefit for a home relocation loan you can use the 3520-6: Last updated on 10/21/092-11prescribed interest rate in effect when the loan was granted (for the entire year) if it results in a lower amount [ITA 80.4(4)]. The amount of the benefit is reduced by any payments made by the employee during the year or within 30 days of the end of the year [ITA 80.4(1)(c)]; and the interest benefit on a $25,000 of housing loan using the lesser of the prescribed rate and the rate in effect at the time the loan is madeNote: the 110(1)(j) deduction is only available in the first 5 years of a loanread 3-11 to 3-14 carefully3.4ITA 110.6 Capital Gains Exemptionthis is a lifetime deduction of $750,000 available for each individual for capital gains realized from the sale of shares of qualified small business corporations (incorporated small businesses) and qualified farming and fishing properties. Discussed further in ADMS 4562.3.5ITA 111 Loss carryovers from other yearsLoss carryovers are losses from another taxation year carried over as a deduction in computing the taxable income of the current taxation year There are two main types of loss carryovers:Non-capital losseslosses from a source other than allowable capital lossesthey can be carried back 3 years, forward 20 years if losses incurred in taxation years ending after 2005, 10 years if losses incurred in taxation years ending after March 22,...
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3520-6- updated 2009-jfth - 3520-6: Last updated on...

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