Homework answers / question archive / Grant MacEwan University - ACCT 328 Capital gains and losses 1)FDB Company has the following in the current? year: Capital gains of $ 4,500 Capital losses of $ 14,500 Business income of $ 3,500 Property income of $ 1,500 Which of the following will be included in Net Income for Tax Purposes for FDB ?Company? Choose the correct answer

Grant MacEwan University - ACCT 328 Capital gains and losses 1)FDB Company has the following in the current? year: Capital gains of $ 4,500 Capital losses of $ 14,500 Business income of $ 3,500 Property income of $ 1,500 Which of the following will be included in Net Income for Tax Purposes for FDB ?Company? Choose the correct answer

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Grant MacEwan University - ACCT 328

Capital gains and losses

1)FDB Company has the following in the current? year:

Capital gains of $ 4,500

Capital losses of $ 14,500

Business income of $ 3,500

Property income of $ 1,500

Which of the following will be included in Net Income for Tax Purposes for FDB ?Company?

Choose the correct answer.

A.

capital losses of? $0

B.

capital gains of $ 10,000

C.

capital losses of $ 4,500

D.

capital losses of $ 2,250

 

2. James has? non-depreciable property with an adjusted cost base of ?$158,000. The fair market value of the property is ?$178,000. James sells the property to his son Jamison for ?$167,000. Two years? later, Jamison sells the property to an unrelated individual for ?$189,000. How much capital gain will be recognized by each on the sale of the? property?

Choose the correct answer.

A.

James?, ?$20,000?; Jamison?, ?$11,000

B.

James?, ?$9,000?; Jamison?, ?$22,000

C.

James?, ?$9,000?; Jamison?, ?$11,000

D.

James?, ?$20,000?; Jamison?, ?$22,000

 

3. Consider? Sam, an individual who has a piece of property that substantially appreciated since he purchased it. If Sam decides to sell the? property, a sale to which of the following people would be considered to be? non-arm's length?

Choose the correct answer.

A.

a buyer that contacted Sam from an advertisement for the property

B.

?Sam's manager at his place of? employment, Jude

C.

his? wife, Paula

D.

his friend? Rob, whom he has known for 20 years

 

4. An ITA? 40(1)(a)(iii) capital gains reserve can be deducted by a taxpayer in the current taxation year only if? the:

Choose the correct answer.

A.

Capital gain incurred on the disposition is in excess of a certain threshold amount.

B.

Number of preceding tax years since disposition of the particular asset is at least five.

C.

Total proceeds of disposition have been received in the current taxation year.

D.

Total proceeds of disposition have not been received in the current taxation year.

 

5. Luz makes the following purchases of shares of Globex?, a public Canadian? company:

 ?1/1/2001: 95 ?shares, ?$30 each

 ?1/1/2005: 220 ?shares, ?$60 each

 ?1/1/2010: 410 ?shares, ?$18.00 each

The shares are capital assets to Luz. Luz sells 95 shares during the current taxation year and receives proceeds from the sale of ?$7,000. How much is Luz?'s gross capital gain on the? sale?

Choose the correct answer. ?(Round to the nearest? dollar.)

A.

?$4,150

B.

?$5,700

C.

?$3,930

D.

?$0

6. Dr. John Cloutier is 36 years old and is in the process of getting a divorce. As part of the divorce? proceedings, Dr. Cloutier must sell a number of his assets and holdings in order to divide the assets of the marriage and pay a large settlement to his former? spouse, Jill Cloutier. Dr. Cloutier has provided you with the following list of assets that he sold in the current? year, including the asset cost and the proceeds of? disposition:

Asset Description             Proceeds of Disposition Original Price Paid

Sailboat

                                                $ 93  000.00                                         $ 81  000.00

Speedboat                          $ 50  000.00                                         $72,000.00

Home                                    $ 390  000.00                                       $225,000.00

Additional  information?:

The home was the principal residence for Dr. Cloutier and his former spouse for 10? years, ending in the current taxation year. Last? year, Dr. Cloutier sold his cabin at the? lake, which he claimed as his principal residence for two taxation years? (the cabin at the lake was designated as Dr. Cloutier?'s  principal residence for the two most recent taxation? years.) Therefore, this home cannot be claimed as Dr. Cloutier's principal residence for those years.

 

Vacant land                        $ 47  000.00                                         $ 315  000.00

Additional information?:

Dr. Cloutier bought this vacant land as an investment property. Since its? purchase, the land has been vacant and Dr. Cloutier has not earned any income on the? land, but he paid $16,000 in property taxes and $485 on mortgage interest on the land during this time.

485 Big Pharma shares   $ 485 per share                 $ 680 per share

 

 

Additional information?: On the sale of the? shares, Dr. Cloutier paid a brokerage commission of $ 3,300

 

950 Dr. John Cloutier Professional Corporation $ 2  950                   $ 110$110 per share

Additional? information: Dr. Cloutier had to liquidate some shares of his privately owned professional corporation? (which operates his dental? practice) to pay for a settlement to his former spouse. Dr. Cloutier

paid legal fees related to this sale of shares of $16,550.

Please note that these shares do not meet the definition of Qualified Small Business Corporation Shares (QSBC).

 

Gold ring                              $ 4  000                                 $ 0$0

 

Additional? information: Dr. Cloutier inherited this ring from his? mother's estate. At the time of his? mother's death, the ring had a fair market value of $260.

 

Westjet shares                 $ 48 per share? (December)          Various

 

Additional information?: Dr. Cloutier purchased the Westjet shares over a period of time. Several years ago, he purchased 1,100 shares for $20 per share. In January of the previous taxation? year, Dr. Cloutier purchased 800 shares for $19 per share. In April of the previous taxation? year, Dr. Cloutier sold

1,100 shares at $20 per share to buy a gift for his wife. In June of the current taxation?year, Dr. Cloutier purchased 1,050 shares for $29 per share. In October of the current taxation? year, Dr. Cloutier purchased another 1,450 shares for $35 per share. In December of the current? year, Dr. Cloutier sold all of his remaining Westjet shares. There are no brokerage fees on any of the Westjet share transactions.

Requirement 1. Calculate the capital gain? (or loss) for each of the dispositions in the current taxation year.

Fill in the table below showing the capital gain? (or loss) for each item.? (Round your answers to the nearest cent. Enter losses with parentheses or a minus? sign.)

Asset Description	Capital gain (or loss)
Sailboat	12000
Speedboat	-22000
Principal Residence	165000
Vacant Land	-284485
Big Pharma Shares	-97875
Dr. Cloutier PC Shares	2681450
Gold Ring	3000
Westjet Shares	47982

 

Requirement 2. Calculate the net taxable capital gain for Dr. John Cloutier for the current year. ?The net taxable gain for the year is

 

7. Requirement? 3(a). What are the rules in regard to the? carry-back and? carry-forward rules for capital? losses? Do these rules differ from the rules that apply to? non-capital losses?

 

8. Which of the following statements with regard to the ITA 54 definition of a principal residence is? correct?

A.

A principal residence is an accommodation owned and ordinarily inhabited by the taxpayer in the year.

B.

A principal residence is an accommodation owned and inhabited by the taxpayer for at least one year.

C.

The definition of principal residence excludes? land, therefore the disposition of land where the principal residence is located will be subject to capital gains taxation.

D.

For each taxation? year, the taxpayer and spouse or? common-law partner may each designate a property as a principal residence.

 

 

 

 

 

 

9. The following information relates to the sale of a piece of land in the current taxation? year:

Adjusted cost base of? land: $275,000

Total proceeds of? disposition: $500,000

In the current? year, the seller received? $200,000 of the proceeds of disposition in cash and a note payable for the remainder? ($300,000). What is the maximum? ITA40(1)(a)(iii) capital gains reserve that can be claimed by the seller in the current? year:

A.

?$135,000

B.

?$180,000

C.

?$225,000

D.

?$0