Unit 1 Flashcards
ITA format
-Division A: First the basis for taxation is established in Canada; that is who needs to read the ITA. Part I determines who must pay income tax
- Division B:
Sections 3-4: Sources of income
Subdivision a-d: rules for determining NI
for each source
-Division C: Adjustments made to calc TI
-Division E-J: Tax credits & applicable federal income rates to calc TP
Personal sources of income
-Employment income
-Business income
-Prop income
-Capital gains and capital lossess
Employment income
Generally includes:
- Salary, wages, and gratuities
-Bonus, tips honorariums, and commission
-Other inclusions arising from employment
-Deductions allowed against EI
Property income
Property income generally includes:
-Interest income from savings, deposits, loans, bonds, and debentures
-Taxable dividend income including a gross-up
-Net rental income after relevant deductions
-Royalty income
Capital cost allowance
UCC beg+purchases- Disposals (lesser of cost and proceeds)+ AII (if additions greater than disposals)=Base amount for current yr CCA.
-UCC ending= UCC beg+Additons-Dispoals-(CCA base*rate)
-Taken when asset is available for use
Available for use
-Earliest of the following:
a) The time its first used by the taxpayer to generate income
b) Second taxation yr the following the acquisition
Short taxation yr
-CCA in yr 1= max CCA* # of days in fiscal yr/365
-AOC
Classes
-1: Buildings (4%) & nonresidential buildings (6%) & manufacturing and processing (10%)
-3: Building acquired before 1988 (5%)
-8: Furniture/fixtures/equipment (20%)
-10: Passenger vehicles under $34K (30%)
-10.1: Passenger vehicles over $34K (30%)
-12: Small tools less than $500 (100%)
-13: Leaseholds improvements (lesser of 5yrs & remaining lease term+ first renewal)
-14: Limited life intangible (over legal life)
-50: Computer hardware and software (55%)
-43: Electric vehicles (30%/50% depending on KW)
Class 10.1
-Each vehicle costing more than $34K
-No terminal loss/recapture on disposition
-When immediate expensing has not been taken: one-half of the CCA that would otherwise have been allowed had the vehicle not been disposed of may be claimed
-When the taxpayer made use of the immediate expensing rules: in the year of disposal, adjusted proceeds are credited to UCC, resulting in recapture (since UCC is 0)
Adjusted proceeds = proceeds * ($34,000/original cost of the vehicle)
CCA claimed for the year is equal to
-Where AII applies: Acquisition1.5rate
-Where 1/2 yr rule applies= Acquisition0.5rate
Recapture (gain)
-An income inclusion of the negative UCC balance after adding the cost of all additions and deducting all disposals
- Taxpayer took too much CCA and needed to be added back to NIFTP
Terminal loss
-An income deduction if after adding the cost of all additions and deducting all disposals a + balance remainings in the class and no other assets remain
Immediate expensing rule
-Immediate expensing of eligible properties (after Apr 19, 2021)
-Limit of $1.5M shared between associated CCPCs
-Available when acquisition> disposals
- Excluded classes:
Class 1-6 & 14.1 & 17 & 47 & 49 & 51
Rental prop sale
-POD are allocated to the land&building based on each FMV
-Above results in a TL on the building and a CG on the land, the following must be done
-TL>CG: Reduce TL by CG and deduct the remaining balance on NITP
-CG>TL: Reduce CG by TL and include 1/2 of the remaining balance on NITP
SCH 1 add-backs
ITA Part I Division B
-Any expenses incurred for reasons other than earning income.
-Income taxes / CRA interest & penalties/ Amortization/ Political contributions / 50% of ME
-Recapture (gain)
-TCG
Individuals: Separate section
Corp: classifeid as AII
-Donations
Deducted in Divison C
-Recreational dues (golf, yacht club,etc)
-Bond discount amort
-Automobile mileage allowance unless its a taxable benefit to the employees 
-Lease costs excess of permitted amount
-Life insurance: amount deductible is the lesser of prem paid and net cost. Deductible if its required by the lender as loan collateral
-Equity loss & dividends on investment
-Asset write-downs
-Reserves
-Unpaid remunerations:
Deductible if paid 180 days at yr end