Tax - Ch7 Solutions

# Tax - Ch7 Solutions - CHAPTER 7 INCOME FROM PROPERTY K C...

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CHAPTER 7 INCOME FROM PROPERTY KC 7-1 [ITA: 12(1)(c), 12(3), (4), (11) - Interest income] In both cases \$1,236 of interest will be earned and received on the maturity of the bond on October 31, Year 3. Nov 1, Year 1 to Oct 31, Year 2 - \$10,000 x 6% = \$ 600 Nov 1, Year 2 to Oct 31, Year 3 - \$10,600 x 6% = 636 \$1,236 Timing of income recognition for tax purposes: Percel Ltd. Corporations must include interest income as it is earned on a daily basis [ITA 12(3)]. Year 1: Nov 1 to Dec 31 - \$10,000 x 6% x 61/365 = \$ 100 Year 2: Jan 1 to Oct 31 - \$10,000 x 6% x 304/365 = \$500 Nov 1 to Dec 31 - \$10,600 x 6% x 61/365 = 106 606 Year 3: Jan 1 to Oct 31 - \$10,600 x 6% x 304/365 = 530 \$1236 Debra Individuals must include interest income on an annual accrual basis referred to as an anniversary day accrual [ITA 12(4)]. Interest earned to the anniversary day must be included. The first anniversary day in this case is October 31, Year 2 [ITA 12(11)]. The second anniversary day is October 31, Year 3, the maturity date in this case. Year 1:

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## This note was uploaded on 12/28/2011 for the course TAX 101 taught by Professor Mcgregor during the Fall '07 term at Wisc La Crosse.

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Tax - Ch7 Solutions - CHAPTER 7 INCOME FROM PROPERTY K C...

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