Chapter 10 Taxable Income and taxes payable part 1 2011

Chapter 10 Taxable Income and taxes payable part 1 2011 -...

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© Jakubowicz 2011 1 Chapter Ten Individuals: Determination of Taxable Income and Taxes Payable 1
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© Jakubowicz 2011 2 Taxable Income Formula Net income for tax purposes XXX Less Division C deductions (XXX) = Taxable Income Division C deductions (include): Stock option deduction [p.110(1)(d) and (d.1)] Home relocation loan deduction [p.110(1)(j)] interest benefit on first $25,000 of qualifying loan Capital gains deduction [s.110.6] Losses not utilized from other years [s.111] 2
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© Jakubowicz 2011 3 Taxable Income The Capital Gain Deduction (CGD) First $750,000 of capital gain ($375,000 taxable capital gain) tax exempt Available only to individuals Qualifying Assets: 1. Shares of qualifying small business corporation (QSBC) 2. Qualifying farming or fishing business 3
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Qualifying Small Business Corporation (QSBC) [s.248] © Jakubowicz 2011 4 90% asset test 24 Months before sale date Date of Sale 50% Asset test Ownership test QSBC Definition CCPC test
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© Jakubowicz 2011 5 Qualifying Small Business Corporation (QSBC) [s.248] QSBC Asset test at time of sale All or substantially all of its assets (at least 90% of the FMV) are used to conduct an active business in Canada by the corporation or a related corporation Throughout the 24 months preceding the sale 1. The corporation was a CCPC, 2. Ownership test No unrelated person owned the shares, and 3. Asset test: More than 50% of the FMV of the assets of the corporation were used in an active business carried on in Canada; (or shares or debt of other corporations meeting the test) 5
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© Jakubowicz 2011 6 Taxable Income Capital Gain Deduction CGD in any year limited by two items: 1. Capital losses applied (including ABILs) only to extent that lifetime capital gains exceed capital losses 2. Accumulated investment losses (CNIL) [S.110.6(1)] CGD available is reduced by the total CNIL balance CNIL does not eliminate or reduce total available CGD - simply delays its use until a later year 6
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© Jakubowicz 2011 7 Taxable Income Capital gains deduction CNIL at the end of 2011 Cumulative interest expense & other carrying charges Cumulative rental losses In excess of Cumulative interest income Cumulative dividends (taxable amount) Cumulative rental income 7
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© Jakubowicz 2011 8 Taxable Income Non-Capital Losses [p.111(1)(a)] Unused business, property and employment losses Plus ABILs first 10 years after incurred Can be carried back 3 years Carried forward 20 years Used against all sources of income 8
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© Jakubowicz 2011 9 Taxable Income Net Capital Losses [p.111(1)(b)] Net Capital Losses : Allowable capital losses incurred in current year that exceed taxable capital gains
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This note was uploaded on 12/21/2011 for the course RSM rsm324 taught by Professor Dan during the Fall '11 term at University of Toronto- Toronto.

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Chapter 10 Taxable Income and taxes payable part 1 2011 -...

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