AFM362 Lecture Notes - Lecture 6: Defined Benefit Pension Plan, Refinancing, Life Insurance
28 Jun 2018
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or it'll be brought back into income on the first day of the third taxation year following that the payable was
declared
Unpaid remuneration must be paid within 179 days of the end of the taxation year or else it'll not be deductible
until the year in which it is actually paid.
•
See page 210•
See page 212•
CCA deductions •
Incorporation expense - the first $3,000 deductible •
Interest on funds borrowed to earn income e.g. on the purchase of assets or on indebtedness arising from the
acquisition of capital assets
•
Printing and advertising, legal and accounting fees, registration○
Expenses incurred to becoming indebted on the purchase of capital property to earn income
○
Refinancing costs such as rescheduling, restructuring or assumption of debt used for purpose to earn
income
○
Financing expenses are deducted over 5 years. ○
Expenses of issuing shares or borrowing money•
Premium on life insurance used as collateral•
Reserve for doubtful debts, must be brought back into income the next year and deduct the reserve of that year•
Reserve for goods not delivered and services not render but limited by another rule, must be brought back into
income the next year and deduct the reserve of that year
•
Manufacturer's warranty reserve for amounts paid or payable to an insurer to insure liability under warranty
agreement, must be brought back into income the next year and deduct the reserve of that year
•
Reserve for an amount not due until a later year under an instalment sales contract•
Reserve = gross profit/gross selling price x amount receivable ○
A reserve can be deducted for no more than three years, including the year of sale•
Bad debt don’t need to be included in income the next year, only if its recovered then will include•
Defined benefit plan- all contribution are deductible
○
18% of the employer's compensation defined to be employment income
A specified dollar limit, for 2017 it is 26,230
Money purchase/defined contribution plan - total of employer and employee contributions are limited to
lesser of
○
Employer's contribution to RPP within the year or 120 days after the end of taxation year•
1/2 of the money purchase dollar limited
18% of the employee's compensation for the year
Generally where there is no RPP the limit is the lesser of○
Employer's contribution to DPSP (deferred profit sharing plan) within the year of 120 days after, and if it was not
deducted by the employer in a previous year
•
Deducted over what would have been the remaining term of the lease, including renewal periods○
1/2 of the unamortized balance is deductible if the property is sold
○
Cancellation of lease - if the property continues to be owned by the lessor•
Landscaping of grounds•
Representations made to a government body/agency for obtaining license, permit, franchise or trademark related
to the business
•
Investigation of site planned for use in the taxpayer's existing business•
Utilities service connections - paid to an arm's length for use of electricity, gas, telephone, water, sewers. No CCA
allowed because the taxpayer does not own the service connections
•
The building need not be owned by the taxpayer making the expenditure ○
Disability-related modifications and equipment •
Convention expenses- up to 2 a year, must be for business and location must be within the territorial scope of the
organization holding the convention. cannot be like an internal business meeting such as a sales conference within
a business
•
Deductions specifically permitted
An expenditure that restores an asset to its original condition is regarded as income nature- deductible ○
An expenditure which prolongs the life of an asset is regarded as capital not deductible•
A dividend received is to be included in income from property •
Embezzlement is deductible as long as its not incurred by partner or senior officer•
Damages for failure to deliver goods are deductible treated as normal business expenses•
Extras
AFM 362 Page 2
Document Summary
Or it"ll be brought back into income on the first day of the third taxation year following that the payable was declared. Unpaid remuneration must be paid within 179 days of the end of the taxation year or else it"ll not be deductible until the year in which it is actually paid. Interest on funds borrowed to earn income e. g. on the purchase of assets or on indebtedness arising from the acquisition of capital assets. Printing and advertising, legal and accounting fees, registration. Expenses incurred to becoming indebted on the purchase of capital property to earn income. Refinancing costs such as rescheduling, restructuring or assumption of debt used for purpose to earn income. Reserve for doubtful debts, must be brought back into income the next year and deduct the reserve of that year.
