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Tax - Ch10 Solutions II

Tax - Ch10 Solutions II - CHAPTER 10 INDIVIDUALS...

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CHAPTER 10 INDIVIDUALS: DETERMINATION OF TAXABLE INCOME AND TAXES PAYABLE Solution to P 10-2 3(a) Income from law practice (business) $97,000 3(b) Taxable capital gains: Public corporation shares – 1/2($80,000) $40,000 Small business corporation shares (assumed to be QSBC) 1/2 ($20,000) 10,000 50,000 Net gains from listed personal property 20X1 gain – ½ x $8,000 $4,000 20X0 carry forward – 1/2($4,000) (2,000) 2,000 52,000 Allowable capital loss – 1/2 ($14,000) (7,000 ) 45,000 142,000 3(c) Other deductions (see Note 2) CPP contributions on self-employed earnings [ITA 60(e)] (2,217 ) 139,783 3(d) Property loss – rental ($28,000 - $37,000) (no CCA) [Reg. 1100(11)] $(9,000) Farm loss - restricted [ITA 31(1)&(1.1)] $2,500 + 1/2($12,500 - $2,500) (7,500 ) (16,500 ) Net income for tax purposes 123,283 Deduct: Net capital loss forward [ITA 111(1)(b)] (7,000) Capital gains deduction (see Note 1) (10,000 ) Taxable income $106,283 Note 1: Capital gain deduction [ITA 110.6] Unused capital gains deduction available: Lifetime limit ($750,000 x1/2) Claimed previously Available $375,000 (0) $375,000
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$325,000 Annual gains limit: Lesser of Net taxable capital gains $45,000, and Net taxable capital gain (QSBC) $10,000 $350,000 Deduct Net capital losses (in excess of other net gains) (10,000) Deduct ABIL $340,000 Cumulative gains limit: Qualifying Taxable capital gains (1985 – 2011) Net capital losses in excess of other gains(1985–2011) ABILs deducted (1985 – 2011) Capital gains deductions claimed (1985 – 2010) CNIL at end of current year Cumulative net investment loss (CNIL): The CNIL balance consists of post 1987 investment expenses in excess of investment income for the same period Opening CNIL balance Investment expenses claimed in current year
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