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

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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
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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
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