UNIT 2- PROPRIETORSHIPS AND PARTNERSHIPS

Question 1

Business activity

Answer 1

any step in process of creating, producing, delivering a good/service in exchange for payment in money or other valuable consideration

Question 2

Sole proprietorship

Answer 2

business unincorporated + owned by only 1 person

• simplest for of business
• must carry on business activities
• created by person commencing business activities w/o taking steps to form other business organization
• no legal steps taking to create sole prop.
• unlimited liability

Question 3

Taxation of sole prop

Answer 3

• net income of biz is incoem of sole proprietor– taxable to proprietor
• property used in biz considered property of sole prop

Question 4

Partnerships

Answer 4

-relationship between 2 or more ppl carryong on incorporated biz
-must carry on business activity– not passive
investing
- not seperate legal entity from partners

Question 5

Types of partnerships

Answer 5

• General partnerships
• Limited partnerships
• Limited Liability partnerships

Question 6

General Partnership

Answer 6

simplest form of partnership

• formed w/o legal formalities
• Just 2 or more ppl carrying out business actibvity together
• unlimited liability
• jointly + severally liable

Question 7

General Partners

Answer 7

entitled to take on active role in managing thwe busines and unlimited personal liablity

Question 8

2 ways to view partnership

Answer 8

Entity: partnership seperate and apart from partners
- good if partnership dealing with outsiders

Aggregate: partnership is collection of individuals or proprietors engaged in same biz

Question 9

Dissolving Partnership

Answer 9

default rules: if 1 partner retires, dies, insolvent–> partnership dissolved, can replace them

Question 10

Partnership Capital

Answer 10

Default rules; all partnership capital shared equally

Question 11

Distribution of profits of partnership

Answer 11

Default rules: profit/losses shared equally

Question 12

cca

Answer 12

deduction permitted for tax purposes to recognize wear and tear nad obselescence of property over time on depreciable assets
-partners must negotiate amt of CCA to claim

Question 13

Partnership Interest

Answer 13

= joining partnership

• can be acquired by providing capital to partnership if new/expanding , buy interest fro retiring partner
• it is a non depreciable capital property
• sale or disposition can result in CG or CL

Question 14

Calculating ACB

Answer 14

??? LATER

Question 15

Calculating CG or CL on distribution

Answer 15

?? LATER

Question 16

Section 97 rollover

Answer 16

can contribute depreciable/other capital property to partnership instead of cash- @FMV

• may trigger CG/CL/RECAPTURE b/c trf deemed disposition for tax
• can elect to trf at partners ACB/UCC w/o realizing gain/loss

Question 17

Limited partnerships

Answer 17

1 or more partners have limited liability for debts/liabilities of partnership
- must have at least 1 limited partner and 1 general partner

Question 18

Limited partner

Answer 18

passive investors- just contributes capital, univolved in business operations

Question 19

General Partner

Answer 19

manages business + personally liable

Question 20

Limited Partnership- At risk rules

Answer 20

investor may only make deductions on own tax return w/ respect to specific investment to extent deduction reduces ACB to 0–> cannot be negative

Question 21

Establishing Limited partnership

Answer 21

formed when partnership files declaration with prescribed information with province registrar in acordance with prov limited partnership act
-must be signed by everyone

Question 22

Joint ventures

Answer 22

??

Question 23

Accrual method of accounting

Answer 23

• reports income in fiscal period EARNED regardless when gets paid
• deducts expenses in fiscal period INCURRED whether paid in that period or not

Question 24

Cash method

Answer 24

• report income in year rec’d cash

- deduct expenses in year paid

Question 25

Individuals Net Income/loss from biz

Answer 25

share of partnership

• any other deductible amts
• any business use of home expenses