2014 clarence byrd inc 10 canadian tax principles

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Unformatted text preview: hodes has employment income of $20,000, taxable capital gains of $30,000, and a business loss of $70,000. Net and Taxable Income = Nil Analysis Amount E = $70,000 Amount F = $50,000 ($20,000 + $30,000) Non­Capital Loss = $20,000 ($70,000 ­ $50,000) Copyright © 2014, Clarence Byrd Inc. 11 Canadian Tax Principles Treatment Of Losses • Non-Capital Losses – Carry Over Only Available After Current Year’s Income Income Reduced To Nil Reduced – Carry Back 3 Years, Forward 20 Years Copyright © 2014, Clarence Byrd Inc. 12 Canadian Tax Principles Treatment Of Losses • Net Capital Losses – Excess, if any, of allowable capital losses over taxable Excess, capital gains capital – Can’t be used in year incurred – General Rules • Back 3 Years • Forward For Life Of Taxpayer Copyright © 2014, Clarence Byrd Inc. 13 Canadian Tax Principles Treatment Of Losses • Net Capital Losses – Carry Back • Deducted at carry back year inclusion rate – Carry Forward • Deducted at carry forward year inclusion rate • May require an adjustment of the inclusion rate from year May incurred incurred Copyright © 2014, Clarence Byrd Inc. 14 Canadian Tax Principles Treatment Of Losses Example: Conversion of Net Capital to Non­Capital Martha Stuart has employment income of $50,000, taxable capital gains of $90,000, and a business loss of $300,000. She also has a net capital loss carry forward of $120,000. Non­Capital Loss Calculation Amount E = $390,000 ($300,000 + $90,000) Amount F = $140,000 ($50,000 + $90,000) Non­Capital Loss = $250,000 ($390,000 ­ $140,000) This leaves a net capital loss of $30,000 ($120,000 ­ $90,000). The use of this loss was limited to the current year taxable capital gains. Copyright © 2014, Clarence Byrd Inc. 15 Canadian Tax Principles Treatment Of Losses • Net Capital Losses At Death – Against any type of income: • In year of death • In year preceding death – Reduced by previous use of lifetime capital gains Reduced deduction deduction – Deducted at inclusion rate from year of incurrence Copyright © 2014, Clarence Byrd Inc. 16 Canadian Tax Principles Business Investment Losses • A Capital Loss On Shares Or Debt Of “Small Business Capital Small Corporation” Corporation – CCPC – Active Business • Substantially All (90%) Of The FMV Of The Assets • Primarily (50%) In Canada – Includes Shares Of Other Small Business Corporations Copyright © 2014, Clarence Byrd Inc. 17 Canadian Tax Principles Business Investment Losses • Special Characteristic: Special Can Be Deducted Against Any Type Of Income Can • Deductible One-Half Amount Referred To As An Allowable Deductible Business Investment Loss (ABIL) Business Copyright © 2014, Clarence Byrd Inc. 18 Canadian Tax Principles Business Investment Losses • Must Be Deducted In Year Realized To The Extent Of Must Sufficient Income Sufficient • Unused Amounts Unused – Non-Capital Carry Over – Back For 3 Years, Forward 10 Back (Not 20) Years (Not –...
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This note was uploaded on 09/19/2013 for the course COMM 355 taught by Professor Trancheung during the Fall '10 term at The University of British Columbia.

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