IFITC Chapter_10

IFITC Chapter_10 - Chapter 10 Computation of Taxable Income...

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Chapter 10 Computation of Taxable Income and Taxes Payable for Individuals 1
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Calculation of Taxable Income Division B Subsection 3(1) Net Income for Tax Purposes Division C deductions Sections 110 – 114.2 Subsections 2(1), 2(2) Sections 117 – 127.55 Tax Liability Taxable Income 2
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Division C Deductions ITA Reference Division C Deductions 110(1)( d ) Employee stock option deduction 110(1)( f ) Social assistance receipts 110(1)( j ) Home relocation loan 111(1)( a ) Non-capital loss carryovers 111(1)( b ) Net capital loss carryovers 111(8) Farm loss 110.6 Capital gains deduction 3
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Stock Option Deduction Division C deduction = 50% of benefit Non-CCPC CCPC If: FMV at date option granted ≤ exercise price If: FMV at date option granted ≤ exercise price Or Shares held ≥ 2 years from date of purchase (except for deemed disposition at death) Timing of deduction Purchase Disposition or deemed disposition 4
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Deduction for Certain Receipts Payments included in Division B but not intended to be taxed are deducted under Div. C Guaranteed Income Supplement, Social assistance payments, Workers’ compensation, and Amounts that are exempt from tax by virtue of a tax treaty. 5
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Home Relocation Loan “Loan used to acquire a home which is at least 40 km closer to an employee’s new work location than his/her older residence.” Deduction is least of: a) Interest on the whole loan as computed using the “lesser of” rule minus interest paid during that year and 30 days thereafter; b) Interest on $25,000 loan using the “lesser of” rule, but restricted to a max. of 5 years; and c) Total benefits from all low-interest or no-interest loans. 6
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Loss Carryovers Non-capital loss carryover If current year’s loss from non-capital sources exceeds income from all other sources in the current year Carry Back Carry Forward For taxation years ending before March 23, 2004 3 7 For taxation years ending after March 23, 2004 and before 2006 3 10 For taxation years ending 2006 and later 3 20 7
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Loss Carryovers Net Capital Loss Carryovers Excess of allowable capital losses over taxable capital gains for that particular year plus ABILs not absorbed in the 10-year carryforward period Carried back 3 years, forward indefinitely Years Inclusion Rate 1972 – 1987 ½ 1988, 1989 1990 – Feb. 27, 200 ¾ Feb. 28, 2000 – Oct. 17, 2000 After October 17, 2000 ½ 8
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Farm Loss Farming as a chief source of income Sideline farming business Hobby farm loss 9
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Capital Gain Deduction $750,000 of capital gains can be sheltered on qualified small business corporation shares, qualified farm property or qualified fishing property 10
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As outlined in section 111.1, deductions under Div. C are deducted in the following order: Sec. 110 Other deductions Sec. 110.2 Lump-sum payments Sec. 111 Loss carryovers (oldest should be applied first) Sec. 110.6 Capital gains deduction Sec. 110.7 Residing in prescribed zone. 11
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This note was uploaded on 11/07/2011 for the course ACCT 470 taught by Professor Dixon during the Spring '11 term at Camosun College.

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IFITC Chapter_10 - Chapter 10 Computation of Taxable Income...

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