AFM202 Chapter 4: Capital Gains and Losses

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OC2146671

2 Nov 2018

School

University of Waterloo

Department

Accounting & Financial Management

Course

AFM202

Professor

Alan Mc Naughton

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Document Summary

Business or property income is combined with other sources of income to compute a taxpayer"s net income for tax purposes, losses from businesses or property are netted against income from other sources. If income is negative after considering all sources, the net income is considered zero for the taxation year: non-capital loss, can be carried to another taxation year to offset taxable income. Capital property includes: depreciable property, any property that if disposed of for a gain or loss, would result in a capital gain or capital loss. Capital loss: taxpayer sells a capital asset for less than its adjusted cost base: capital loss on depreciable property is denied (zero, expenses on the disposition are deductible. Carry over: net income for tax purposes includes taxable capital gains in excess of allowable capital losses. Loss carryovers result in a reduction in taxable income but do not affect net income.

Related Questions

Which of the following statements is correct with regard tobusiness tax calculation?

		When determining a corporationâs taxable income, all of theexpense items are 100% deductible.
		Net operating losses can be carried back to the past three yearsand carried forward to the next 15 years.
		Alternative Minimum Tax system applies to small companies andlow-income taxpayers.
		Dividend and long-term capital gains usually are levied at aflat tax rate which is comparatively high.

periwinklemule54

Maxitech is a Canadian company. It has always used a December 31 year end. On January 1, 2016, the company had the following carry forward balances:

- Net Capital Losses 75,600

- Non-Capital Losses 51,400

- Unused Charitable Donations 4,600

During the 2016 taxation year, Maxitech's records show the following results (all amounts are based on the relevant tax rules):

- Net Business Loss 142,000

- Taxable Capital Gains 21,400

- Allowable Capital Losses 6,500

- Charitable Donations 3,200

- Dividends from Taxable Canadian Corporations 30,400

Required: Calculate the Corporation's minimum net income for tax purposes and taxable income for it's 2016 taxation year. Indicate any balances available for carry forward to subsequent years under each of the following assumptions:

A. It is the policy of the company to minimize net capital loss balances prior to using any other type of carry over balance.

B. It is the policy of the company to minimize non-capital losses prior to using any other type of carry over balance.

cerisemole158

Which of the following amounts is NOT deductedin converting Net Income for Tax Purposes to Taxable Income?

	A.	Losses of other years.
	B.	The lifetime capital gains deduction.
	C.	An amount related to the exercise or sale of stock options.
	D.	The excess of allowable capital losses over taxable capitalgains for the current year.

AFM202 Chapter 4: Capital Gains and Losses

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