Advanced Tax Concepts

Question 1

ACB calculation

Answer 1

purchase price, contribution of capital (property for shares), sales charges, cost of acquisition (legal, land transfer), investment return distributions, capital improvements

Question 2

Identical Properties ACB Rules/Superficial loss

Answer 2

Share ACB, unless different share classes. Buyer can’t repurchase or purchase within 30 days (ownership or beneficial ownership). Applies for spouse as well.

Question 3

ACB of PUP and PLP and gain/loss rules

Answer 3

$1000. PUP can have gain but not loss, not depreciable (cottage).
LPP - losses are possible, but on deductible against other lpp gains (stamps, collector cars, coins, jewellery)

Question 4

AMT Triggers

Answer 4

Certain CCA, losses for lp or tax shelters, resource losses, flow through shares, capital gains, dividends, employee stock options, labour sponsored, abil, foreign investment or employment income. Not payable in year of death

Question 5

AMT Example (can add 80 and deduct 50 or just add 30)

Answer 5

950k cap gain
900k lcge
50k cap gain
50% inclusion
25k taxable gain
15% fed tax
3750 tax payable

950k cap gain
80% amt inclusion (760k)
450k (exeption * 50% = cap gains deduction)
310k taxable can gain
40k amt exemption
270k adjusted income
15% fed tax = 40,500 payable (always based on lowest marginal rate) 36,750 is amt cost, this is the amount that is recoverable. Seven years to recover (can dispose of prop, make rrsp withdrawals)

Question 6

AMT Changes 2024

Answer 6

Basic exemption is now 173k and rate is 20.5%

Question 7

Where attribution doesn’t apply

Answer 7

non-residency of owner, loan for value, separation agreement, death

Question 8

Automobile benefits

Answer 8

Owned car = price (including gst/hst) * 2% * months in year 12 = standby charge + .27 per personal kilometer
leased = 2/3 of lease price including taxes + .27 per kilometer. Can be reduced if primarily used for work. Multiply kilometers driven by/1667 per month * standby charge = op cost benefit. can do that or multiply by 50%. If you drive your own car, .59 for 5000km then .53. Flat rate allowance is taxable.

Question 9

CCA max on car

Answer 9

30,000 for owned vehicle or 800/m on lease for passenger cars. 55k if the vehicle is zero emissions

Question 10

Shareholder loans

Answer 10

controlling interest can take an interest free loan with no tax consequence. should be a written agreement in place and be repaid over reasonable timeframe

Question 11

Sales tax and commissions deductibility

Answer 11

not deductible

Question 12

Hobby farmers limit

Answer 12

17,500

Question 13

Capital losses in year of death

Answer 13

old losses can be applied against regular income, excessive capital losses in year of death can be carried back to the year prior. Estate capital losses in first year can be carried and applied again terminal return

Question 14

Borrowing to invest

Answer 14

must be expectation of profit. vacant land wouldnt count but common stocks usually would (not if they expressly said they wont pay dividends). assumed to have paid back personal borrowing before investment borrowing

Question 15

Child Care deduction

Answer 15

8k six or younger, 5k 7-16, 11k for disabled child, 5k over 16 with impairment, not eligible for disability. deducted by spouse with lower income, unless separated or in post secondary school. day care can be family member (non dependent and reporting the income)

Question 16

taxpayer death deadline

Answer 16

180 days after death or normal deadline

Question 17

4 Returns Filed at Death

Answer 17

Terminal,
Rights and things (owed to the taxpayer prior to death, not as a result of death) salary/commissions earned but not paid, matured bonds, dividends declared,
partnership income
testamentary trust

Question 18

Pay taxes or rollover (calculation)

Answer 18

compares taxes paid now to taxes paid at death and discount to determine a required rate of return. If you can outperform discount rate, use the rollover

Question 19

UCC (Sold for more or less than ucc)

Answer 19

Sold for less = ucc-sale proceeds =terminal loss. if assets are left in class, increases ucc
sold for more but less than acb = taxable as income. if assets are left in class, ucc is reduced.

Question 20

DTC

Answer 20

8662 over 18 and 5053 under 18

Question 21

Change of Use

Answer 21

can change from personal to rental for 4 years without tax consequence but can’t claim cca. can change from rental to personal but will pay back tax and recapature on sale of home

Question 22

Transferring to a joint owner (tax consequence)

Answer 22

if 50% is transferred, cap gain is paid on that amount. 200k value - 60k acb = 140k. transfers 50% =70k cap gain and 35k taxable cap gain

Question 23

Emigration tax deductions and benefits

Answer 23

income declared up to point of departure, can use ful amount of tax deductions but ccb is prorated.

Question 24

Immigration (acb)

Answer 24

assigned acb at entry

Question 25

Tax treatment on assets upon emigration

Answer 25

no deemed disposition on real estate, business property, registered property, deferred salary, stock options, life insurance policies. can defer gains on other property by using it as security with the cra

Question 26

Involuntary loss

Answer 26

something is stolen = deemed disposition. insurance proceeds can be used to buy similar property which assumes the same acb

Question 27

Opt out of rollover

Answer 27

life insurance to charity on death means a big tax deduction, rollover to spouse at acb may not be wise

Question 28

Small business rollover

Answer 28

own shares for at least 185 days, sell, and but shares of anotehr company worth less than 50m within 120 days of year end

Question 29

Charitable donation rules and tax credits

Answer 29

15% on 200 and 29% above that (33% on the amount over 200, to the extent that payer is in the highest tax bracket). can carry forward up to 5 years and use donations all at once. can equal 75% of earned income (100% in year of death or year before). deducted amount offset by any consideration returned from the charity. cultural property or ecologically sensitive land = 75% rule not applying

Question 30

Donation of Securities/ cottage/land/political donations

Answer 30

Donation of cottage results in fmv being counted as charitable donation. securities have capital gains inclusion of 0%. political donations pay 75% on first 400 and 33.33% on 1,275.

Question 31

tuition tax credit

Answer 31

5k per year, can be carried forward

Question 32

Non taxable employee benefits

Answer 32

gifts up to 500 per year, education for employers benefit, heal/dental insurance, discounts, clothing (if uniform). if used for work or personal, likely taxable.

Question 33

Spousal amount and eligible dependent

Answer 33

can transfer basic personal amount if they don’t use it aoll. for eligible dependent, parent must be single or living apart from spouse, can apply for minor child, infirm adult child or dependent parent.

Question 34

Financial/Retirement Planning

Answer 34

Financial not deductible, retirement planning is. investment advice is tax deductible on non reg accounts. commissions not deductible but added to acb