IFITC Chapter_7

IFITC Chapter_7 - Chapter 7 Capital Gains: Personal 1...

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Chapter 7 Capital Gains: Personal 1
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Overview of the Taxation of Capital Gains History Time Period Inclusion Rate Prior to 1972 Not taxable 1972 to 1987 50% 1988 and 1989 66 % 1990 to February 27, 2000 75% February 28 to October 17, 2000 66 % After October 17, 2000 50% 2
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Capital Property 3
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Terminology Accounting terminology Income Tax terminology Selling Price $xx Proceeds of Disposition (P of D) Sec. 54 Cost $xx Adjusted Cost Base (ACB) Sec. 54 Selling costs xx (xx) Expenses of disposition Ssec. 40(1) Profit (Loss) $xx Gain (loss) (xx) Exemption or reserve, if any Sec. 40 $xx Capital gain (CG) or Capital loss (CL) Sec. 39 $xx Taxable capital gain (TCG) or Allowable capital loss (ACL) Sec. 38 4
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Terminology Dispositions Any transaction entitling a taxpayer to proceeds of disposition Deemed dispositions: On change in use of property On death of a taxpayer By way of gift during the lifetime of a taxpayer When taxpayer ceases to be a resident of Canada 5
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Terminology 100% 50% Capital gain (CG) Taxable capital gain (TCG) Capital loss (CL) Allowable capital loss (ACL) Business investment loss (BIL) Allowable business investment loss (ABIL) Capital gains exemption (CGE) Capital gains deduction (CGD) 6
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General Rules Capital Gain/ (Capital loss) = Proceeds of Disposition - ACB + Expenses of Disposition 7
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Specific Provisions Personal-Use Property (PUP) Property used primarily for personal use or enjoyment Gains: Subject to tax Losses: May not be deducted Taxpayer’s cost deemed to be greater of: i. ACB of the property ii. $1,000 Taxpayer’s proceeds deemed to be greater of: i. Actual Proceeds ii. $1,000 8
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Specific Provisions Listed Personal Property (LPP) Special subset of PUP Capital losses can be used but only to extent of LPP gains Carryover (3 years back and 7 years forward) only against LPP gains (applied under Div. B not Div. C) 9
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Specific Provisions Listed Personal Property (LPP) LPP includes PUP that is a (sec. 54): Print, etching, drawing, painting, sculpture, or other similar work of art, Jewellery, Rare folio, rare manuscript, or rare book, Stamp, or Coin. 10
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Principal Residence Exemption Gain on principal residences can be exempted Taxpayer must designate home as “principal residence” for specific years Any residence may be a principal residence as long as he/she ordinarily inhabits the home, even for a short time Only one residence can be designated for a given year 11
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Principal Residence Exemption Steps to follow: 1. Calculate the capital gain per year for each principal residence. 2.
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IFITC Chapter_7 - Chapter 7 Capital Gains: Personal 1...

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