Tax

Question 1

Capital Cost Allowance

Answer 1

Using AII:

Purchases
- Dispositions (Lower of cost or proceeds)
= Net additions

Beg UCC
+ Net additions
= Adjusted UCC

Adjusted UCC
- CCA*
= Ending UCC

*Use AII multiplier for net additions (depends on year available for use)

Question 2

Recapture

Answer 2

Negative UCC balance

What to do: Add back to taxable income

Question 3

Terminal Loss

Answer 3

UCC balance but no assets left in the class

What to do: Deduct from taxable income

Question 4

Personal Use Property (PUP)

Answer 4

-Property used primarily for personal use or enjoyment
-Cannot have a loss on PUP

Cost: Greater of ACB and $1,000
Proceeds: Greater of proceeds and $1,000

Question 5

Listed Personal Property (LPP)

Answer 5

-Relates only to art, jewellery, rare books, stamps and coins
-Capital losses can be deducted but only against LPP gains
-Any unused LPP losses can be carried back 3 years, forward 7

Cost: Greater of ACB and $1,000
Proceeds: Greater of proceeds and $1,000

Question 6

Lifetime Capital Gains Exemption

Answer 6

Deduction to net taxable capital gains only to shares of qualifying small business corporations (QSBC)

QSBC Test
1) Small business corporation
-CCPC
-Substantially all (90%) of assets are used in an active business in Canada (at FMV)
2) Holding period test
-Shares were held for 24 months prior to disposition
3) Basic asset test
-Throughout the 24 month period, more than 50% of the FMV of its assets were used in an active business in Canada

Question 7

Transfers of Property

Answer 7

Gift
-Proceeds for transferor: FMV
-ACB for transferee: FMV

Sale
-Proceeds for transferor: Greater of proceeds and FMV
-ACB for transferee: Lesser of proceeds and FMV

Special rules for spousal transfers
1) Stay in the rollover: Transfer is deemed to happen at cost (proceeds and ACB = ACB)
2) Opt out of the rollover: Same rules as above

Question 8

Transfers of Property - Attribution

Answer 8

-Applies only to non-arm length individuals
-Only property income gets attributed (not business income or capital gains)

Special rules for spouses
-Property income and capital gains will get attributed back to the transferor unless they opt out of the rollover and FMV is received/paid
-Business income does not get attributed

Question 9

Stock Options

Answer 9

Public Stocks
When granted: No tax consequences
When exercised: Employment income, division C deduction
When disposed: Capital gain/loss

CCPC
When granted: No tax consequences
When exercised: No tax consequences
When disposed: Employment income, division C deduction, capital gain/loss

Employment income: FMV at date of exercise - exercise price

Division C deduction: 1/2 of the employment income inclusion if the following is met
-On grant date, the exercise price was equal to or greater than FMV
-The option is for prescribed common shares
-Recipient is at arm’s length
-Below annual limit of $200,000
-For a CCPC, it does not need to meet annual limit, but it does need the shares to have been held for at least 2 years

Capital gain/loss: Proceeds on disposition - FMV on date of exercise