Ch.12 cap gain/losses

Question 1

securities

Answer 1

taxpayer is permitted to make an election to treat the disposition of Canadian securities as a capital transaction regardless of the taxpayer’s intention with respect to these securities.
This election is not available to the following:
• a trader or dealer in securities
• a financial institution
• a corporation whose principal business is the lending of money, the purchasing of debt obligations, or a combination thereof
• non-resident

Question 2

options

Answer 2

There are two types of options:

1. Call option — The grantee pays an amount to the grantor for the right to purchase a property from the grantor.
2. Put option — The grantee pays an amount to the grantor for the right to sell a property to the grantor.

Question 3

Capital gains reserve

Answer 3

disposition of a capital property, the vendor may agree to receive payment over a period of time
The reserve is calculated as the lesser of two amounts:
1. Capital gain × (Proceeds not due * / Total proceeds)
2. 20% of the capital gain × (4 – Number of preceding years ending after the disposition); this ensures the entire amount of the taxable capital gain is brought into income by the end of the fifth year