Tax - Ch8 Solutions

# Tax - Ch8 Solutions - CHAPTER 8 GAINS AND LOSSES ON THE...

This preview shows pages 1–3. Sign up to view the full content.

CHAPTER 8 GAINS AND LOSSES ON THE DISPOSITION OF CAPITAL PROPERTY—CAPITAL GAINS Solutions to Key Concept Questions KC 8-1 [ITA: 40(1)(iii) – Capital gains reserve] The minimum taxable capital gain to be reported is \$50,000 in 20X1, \$30,000 in 20X2 and \$40,000 in 20X3. (20X1) Proceeds \$600,000 ACB (176,000) Selling costs (24,000 ) Gain 400,000 Capital gains reserve – lesser of: \$450,000/600,000 x \$400,000 = \$300,000 4/5 x \$400,000 = \$320,000 (300,000 ) Capital gain \$100,000 Taxable capital gain \$ 50,000 (20X2) Gain (20X1 reserve) \$300,000 Capital gains reserve – lesser of: \$400,000/600,000 x \$400,000 = \$266,667 3/5 x \$400,000 = \$240,000 (240,000 ) Capital gain \$ 60,000 Taxable capital gain \$ 30,000 (20X3) Gain (20X2 reserve) \$240,000 Capital gains reserve – lesser of: \$350,000/600,000 x \$400,000 = \$233,333 2/5 x \$400,000 = \$160,000 (160,000 ) Capital gain \$ 80,000 Taxable capital gain \$ 40,000

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
KC 8-4 [ITA: 20(16), 39(1)(b)(i), 40(2)(g), 40(3.3),(3.4), 53(1)(f), 54 – Capital losses denied] a) There is a terminal loss of \$6,000 on the disposal of the Class 10 asset [ITA 20(16)]. Capital losses are not allowed on depreciable assets [ITA 39(1)(b)(i)]. The selling price of \$10,000 is \$15,000 less than the cost of \$25,000; this loss is fully recognized for tax purposes as follows: CCA claimed in previous year \$ 9,000
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern