Final%20Exam%28April%202008%29%20-%20answers%20-%20solution00

Final%20Exam%28April%202008%29%20-%20answers%20-%20solution00

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STUDENT NAME__________________________ STUDENT #:______________________________ Please circle one: SECTION NUMBER: 201 (11:30am) 202 (4:00pm) Busi 355 202 Sauder School of Business THE UNIVERSITY OF BRITISH COLUMBIA Commerce 355 / Business 355 Introduction to Income Tax Final Examination ANSWERS BOOKLET SOLUTION April 24 th , 2008 Instructor: Tran Chung Total Marks: 45 Time: 180 minutes This ANSWERS BOOKLET consists of 19 pages including this cover page and schedule 8 and 10. Financial calculators can be used during this examination. Allocate your time carefully and clearly explain your analysis. The Income Tax Act is permitted to be used during exam (tabbed with name of provision, underlined, or highlighted, but no other notations or writings). Assume all persons are Canadian resident unless specifically stated otherwise. You CANNOT ask any questions during the exam. If there are any omissions or errors, please state them clearly and make the appropriate assumptions that you feel are necessary to complete the answer. Please answer all questions in this answer booklet. 1
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Part One: Multiple Choice in CAPS (10 questions, 1 mark each – TOTAL 10 marks) Question Answer 1. A – I am still intimidated by tax (nightmares sometime) 2. B – the net taxable capital gain for the year should not include the net capital loss carryforward (taxable income item) but would include the LPP carryforward - net taxable capital gains (part of NIFTP) = 50% x ($2,850 – 820 – 240 – 105) = $843 3. B – time value of money, we want to get the highest deduction upfront as the loss can be carryfoward 4. B – Since the Vancouver home was designated up to 2006. We only have 2007 to designate for the cottage, but since the Vancouver home has “1 +” we do not have to designate the entire period of ownership. So this leaves 2006 (or any other year) available to the cottage. So the cottage will have 80,000 x ((2 + 1) / 8) as the principal residence exemption. The capital gain after the exemption is $50,000 and 50% is taxable = $25,000. 5. A – Harry received the loan in 2007. The son’s loan will be the son’s shareholder loan benefit. 6. C – capital gain = $300,000 – 170,000 – 10,000 = 120,000. Since not all the proceeds were received, we can take a capital gain reserve equal to the lesser of: (i) (280,000/300,000) x 120,000 = 112,000, and (ii) 4/5 x 120,000 = 96,000. So the minimum taxable capital gain = 50% x (120,000 – 96,000) = 12,000 7. B – remember that Anita is not a salesperson. Only deductible items are heat, hydro and maintenance 10% x (2,000 + 2,000 +1000) = $500 8. C – with the current proceeds allocation, there would be a terminal loss on the building of UCC $12,000 – LCOP $0 = $12,000. S. 13(21.1) will apply to reduce the terminal loss to $0. This means that the deemed proceeds of the building will be $12,000. So the land proceeds will be $408,000. So the taxable capital gain = 50% x (408,000 – 80,000) 9.
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  • Winter '10
  • TranCheung
  • Taxation in the United States, taxable capital gain

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