...$146,700 x 2.5% = $3668 for ITR 2013. The written down value of the property could be $146,700 - $3668 x 9 - $3688 x 313/365 = $110542 . 4) If the house is rented out fully and Luke does not living there at all, then it is treated as an investment property and all the expenses incurred likewise would be deductible. In the case Luke would like to rent it partly for example he rents out 2 out of 3 rooms of house and hold the remaining room for living when he is staying the holiday there, then he could no claim the occupation expense such as depreciation, mortgage or interest,… but the running expense such as advertising, cleaning, travel to the property, electricity, gas, water, rates, council and etc. 5) A) the bond money is capital payment, as this money will be received back after the end of contract, then it is not deductible expense. b) Interest payment on the mortgage is deductible expense applied for property investment, Ash could claim $1532 x 12 mths = $18384 per year. c) loan establishment fee is typically the...
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...undertake a business administration course at a private provider not registered as a higher education institution. He has an agreement with his employer that, upon successful completion of the course, he will be promoted to an assistant manager position with his current employer. d. After finishing her final year of school, Sarah enrols in a full-time fashion photography course at a TAFE college. She is supported by her parents during her studies and does not receive any government assistance. She works as a casual sales assistant on weekends. e. Stuart wants to be the manager of a hotel. He enrols in a hotel management course at a TAFE college, one semester of which involves an industry placement to gain work experience. Stuart is placed with a major hotel where he gains experience in all facets of hotel management, including catering, housekeeping and bar work. f. Shannon is undertaking a 4 year university degree in mining engineering. She takes on a job as a casual employee with a mining company during the end of year holiday. It is the company’s policy to take only students who are pursuing relevant studies. Case Study 1 | Answer a. Yes. Because the course enables Barry to...
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...nonrecognition of gains/losses upon transfers of property is to encourage corporate formation. Gains and losses are not recognized upon transfer of property to corporations because essentially the transferee has retained their investment in the property through a different form - stock. When the property is transferred for the stock, the transferee does not recognize a gain or loss and therefore there is no tax burden on the transfer. 14-20 Corporations have the flexibility of choosing their tax year. They can choose to run on the calendar year or a different fiscal year. In addition, their fiscal year does not have to match up to the same accounting periods as the owners of the corporation. In the beginning of a corporation’s life, there is usually a net loss and having a different accounting tax year than that of the owners can lead for a tax benefit for the owners when applying this net loss. In a proprietorship and partnerships generally have to use the same tax year as the owners and S-corporations are generally required to use the calendar year as their tax year. Corporations definitely have the advantage here. 14-22 Corporate capital gains and losses computation is very similar to capital gain/loss for individuals. Capital gains and losses can be short-term and long-term, just like individuals’ capital gains and losses. When a capital gain occurs for corporations, they are required to be included in gross income and are then taxed at the same rate as all other ordinary income. Individuals...
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...Understanding 3. Realized vs. Recognized Gain Explain the difference between a realized gain and a recognized gain. Solution: A realized gain is the excess of the amount realized on a sale or exchange over the adjusted basis of the property sold or exchanged. The recognized gain is the amount of this realized gain that will be treated as income and subject to tax on the seller’s income tax return. 4. Asset Classification What type of assets are Section 1231 assets? What type of assets are capital assets? What type of assets are ordinary income assets? Give several examples of each type of asset. Solution: The most common Section 1231 assets are depreciable realty and personalty used in a trade or business and nondepreciable trade or business realty that have been held for more than one year. Long-term capital gain property held for the production of income that is involuntarily converted is also Section 1231 property. To qualify, all of these assets must have been held for more than one year. Section 1231 assets include machinery and equipment, office furniture and fixtures, rental real estate, factory buildings and land held for future expansion of a business. Capital assets include most investment properties and personal-use assets. They exclude inventory, real and depreciable property used in a trade or business, and accounts and notes receivable from the sale of inventory in the ordinary course of business. Capital assets include investment stocks and...
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...not succeed, so I am going to share my love for business and what I had found out about Anti-Stuffing, but not limited to Net Operating Loss companies and how this affects them. Before 1986, the history of capital gain tax came back to one court ruling. This case was General Utilities and Operating Company v. Helvering, 296 U.S. 200 (1935), which resulted in the General Utilities doctrine. Under this doctrine companies could distribute their corporate properties or stock to shareholders without having to pay a capital gains tax at the corporate level. Before this doctrine was repealed courts did not take into account the built in tax liability when determining the value of a company. As a result of this companies were finding ways around these taxes and saving themselves a fair amount of money. In 1986 the Tax Reform Act was passed making it much harder on companies trying to liquidate. It stated that if a company tries to liquidate it must identify its gains or losses at the time of sale, as if it were being sold on the open market. Under this act any such sale will be taxable. This gave us a double-edged sword, as a result of this act. Their two options both would result in losses for the company buying the stock. The first is called “built in gains”, and the second is duplication of loss. An example of the first is; Company A has a stock that has a fair market value (FMV) of $100 and a basis(which is what the stock was originally bought for or started out...
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...Assignment 3 Question 2 Forgiven Amount, Beginning Balance $100,000 Non-capital loss carryforwards [80(3)(a)] ($11,000 + 15,000) 26,000 $74,000 Net-capital loss carryforwards [80(4)(b)] 1989 (3,000 x 3/2) = 4,500 1994 (12,000 x 4/3) = 16,000 20,500 20,500 $53,500 Capital costs of class 8 property [80(5)] UCC 14,000 CC 60,000 (cannot be more than UCC) 14,000 $39,500 ACB of Land [80(9)] 9,000 Forgiven Amount, Ending Balance $30,500 Added to Income (50%) [80(13)] $15,250 Reduction [61.3(1)] Lesser of: Added amount under 80(13) $15,250 A-2(B-C-D-E) A = 15,250 B = 120,000 C = 115,000 D = 0 E = 50% x (10,000-15,250) = 0 15,250 – 2(120,000-115,000-0-0) = $5,250 $5,250 $10,000 Reserve [61.4] Spread over 5 years = 10,000 x 1/5 = $2,000 $2,000 $2,000 added to income, $8,000 spread over the next 4 years Question 3 PART A The shares of Kipper Ltd. do not qualify for the Capital Gains Deduction (CGD) because, under subsection 110.6(2.1), the corporation is not a Qualified Small Business Corporation (QSBC). There are three criteria for qualifying as a SBC under subsection 110.6(2.1): • Within 24 months preceding the transaction, the shares must not be held by anyone other than the individual owner or persons related to the individual owner. • Within 24 months preceding the transaction, more that 50%...
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...CHAPTERS SEVEN & EIGHT - CAPITAL GAINS: AN INTRODUCTION (Div B, Subdiv c , S38-55) HISTORY Prior to 1972 capital gains were not taxed in Canada and capital losses could not be claimed. The portion (inclusion rate) of a capital gain or loss which is taxable/deductible has changed since then. [calendar 1972 to 1987 => 50%; calendar 1988 to 1989 => 66.67%; calendar 1990 to Feb 27, 2000 => 75%; Feb 28 to Oct 17, 2000 => 66.67%; Oct 18, 2000 to present => 50%] Since 1972, each disposition of capital property requires a separate calculation of taxable capital gain or allowable capital loss. Section 3(b) requires that allowable capital losses be offset against taxable capital gains, except as discussed below for PUP (including LPP) and ABILs. If the net result of all current year capital dispositions is a taxable capital gain, this amount is included in Division B income. If the net result is an allowable capital loss, this amount is not deductible currently since allowable capital losses can ONLY BE DEDUCTED AGAINST taxable capital gains. (A net allowable capital loss for the current year can be carried over to other years under Division C, as will be discussed in chapter 10.) ABILs Allowable Business Investment Losses are effectively allowable capital losses, resulting from the disposition of shares or debt of Small Business Corporations (CCPCs carrying on Active Business), which are deductible against any type of income. (ie not restricted to capital gains.) As such they are...
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...C. CAPITAL GAINS AND LOSSES 1. The concept of ordinary assets. Ordinary assets are: 1) Stock in trade of the taxpayer or other properties of a kind which would properly be included in the inventory of the taxpayer 2) Property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business. 3) Property used in the trade or business and subject to depreciation 4) Real property used in trade or business 2. The concept of capital assets. Capital Assets include all property held by the taxpayer whether or not connected in trade or business but not including those enumerated above as ordinary assets. 3. The importance of knowing whether an asset is capital or ordinary. It is important to determine the correct classification of an asset on account of the preferential tax treatment given to gains or losses from sales or exchanges of capital assets which does not apply to the gains or losses from sales or exchanges of ordinary assets. 4. Capital gain * It is the gain derived from the sales or exchange of capital assets. 5. Capital loss * It is the loss incurred from the sale or exchange of capital assets. 6. Net Capital Gain * It is the excess of the gains from sales or exchanges of capital assets over the losses from such sales or exchanges. 7. Net Capital Loss * It is the excess of the losses from sales or exchanges of capital assets over the gains from such sales or exchanges. 8...
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...CHAPTER 22 S CORPORATIONS Examination Questions 1. During 2013, an S corporation incurs the following transactions. Net income from operations $60,000 Interest income from savings account 28,000 Long-term capital gain from sale of securities 54,000 Short-term capital loss from sale of securities 44,000 The corporation's passive investment income for 2013 is: a. $28,000. b. $38,000. c. $82,000. d. $142,000. e. None of the above. 2. During 2013, Emerald Corporation incurs the following transactions. Net income from operations $125,000 Long-term capital gain from sale of securities 55,000 Short-term capital loss from sale of securities 35,000 Emerald maintains a valid S election and does not distribute any dividends to its sole shareholder, Dakota. As a result, Dakota must recognize: a. Ordinary income of $125,000 and long-term capital gain of $20,000. b. Ordinary income of $125,000, long-term capital gain of $55,000, and $35,000 short-term capital loss. c. Ordinary income of $125,000, long-term capital gain of $55,000, and $3,000 short-term capital loss. d. Ordinary income of $125,000. e. None of the above. 3. During the year, an S corporation incurs a $110,000 net operating loss. Eloise, the sole shareholder, has a $75,000 stock basis, and there is a $100,000 balance in AAA at the beginning...
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...CHAPTER 7 DEDUCTIONS AND LOSSES: CERTAIN BUSINESS EXPENSES AND LOSSES SOLUTIONS TO PROBLEM MATERIALS | | | | Status: | Q/P | Question/ | Learning | | | Present | in Prior | Problem | Objective | Topic | | Edition | Edition | | | | | | | | | | 1 | LO 1 | Bad debts: accounts receivable | | New | | 2 | LO 1 | Bad debts: basis | | Unchanged | 2 | 3 | LO 1 | Bad debts: worthlessness | | Unchanged | 3 | 4 | LO 1 | Bad debts: recovery | | Modified | 4 | 5 | LO 1 | Bad debts: business | | Unchanged | 5 | 6 | LO 1 | Bad debts: business | | Unchanged | 6 | 7 | LO 1 | Worthless securities versus theft loss | | Unchanged | 7 | 8 | LO 2 | Worthless securities versus bad debts | | Unchanged | 8 | 9 | LO 2 | Section 1244 stock | | Modified | 9 | 10 | LO 3, 4 | Casualty loss versus business loss | | Modified | 10 | 11 | LO 3, 4 | Casualty loss | | Unchanged | 11 | 12 | LO 4 | Casualty loss: timing | | Unchanged | 12 | 13 | LO 4 | Casualty loss: reimbursement | | Unchanged | 13 | 14 | LO 4 | Casualty loss: measurement rule for theft | | New | | 15 | LO 4 | Casualty loss: insurance claim | | Unchanged | 15 | 16 | LO 4 | Casualty loss: cost of repairs method | | Unchanged | ...
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...###Descriptive Practice Set for Bank PO exam### Below are the topics given from previous bank PO, Clerical exams. An essay is given to write on these topics or a report is to be write upto 150 to 200 words 1. The Lehmann Crash 2. The market downslide 3. Leadership is doing the right things; Management is doing things right 4. Corporate Social Responsibility benefits the bottom line 5. Has globalization really worked? 6. Integrity at work 7. Buying options: A matter of trust 8. People: The most important asset of any enterprise 9. The second great crash 10. Management styles: Why things go wrong? 11. Do we need to dress for success? 12. What do Chief Executive Officers do? 13. The element of Risk in management. 14. Outsourcing to reduce risk 15. Management is what managers do 16. Terrorism benefits whom 17. Nation’s growth must be inclusive 18. Chandrayaan – One giant leap for Indian Astrophysicists 19. The secret to winning more gold in the Olympics 20. The ban on smoking- Gimmick or success 21. Why does a nation need forex reserves? 22. What makes you a suitable candidate for an MBA? 23. Is India really shining? 24. What is revenue deficit? 25. What is the job of the Manager? 26. Is democracy working for India? 27. Performance appraisal- A Useful tool for growth 28. Corruption an outcome of Democracy 29. Agricultural subsidies: A Boon or a Bane 30. Do we need a dictator? 31. Does the media need censorship? 32. Reforms in education – a necessity ...
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...Chapter 14 Post Test 1. Gabriel has the following capital gains and losses for 2013: $6,000 STCL, $5,000 28% gain, $2,000 25% gain, and $6,000 0%/15%/20% gain. Which of the following is correct: a. The net capital gain is composed of $5,000 28% gain and $2,000 0%/15%/20% gain. | | | b. The net capital gain is composed of $1,000 28% gain and $6,000 0%/15%/20% gain. | | | c. The net capital gain is composed of $3,000 28% gain, $2,000 25% gain, and $2,000 0%/15%/20% gain. | | | d. The net capital gain is composed of $1,000 25% gain and $6,000 0%/15%/20% gain. | | | e. None of these choices are correct. | | | | Incorrect. The $6,000 STCL first offsets the highest tax rate gain, then any remaining loss offsets the next highest tax rate gain. Thus, $6,000 STCL – $5,000 28% gain – $1,000 25% gain leaves $1,000 25% gain and $6,000 0%/15%/20% gain. | 2. Which of the following assets held by an accrual basis accounting firm is a § 1231 asset? a. A desk used in the business and held more than one year. | | | b. A computer used in the business, held more than one year, but fully depreciated under § 179 when acquired. | | | c. An investment in Orange Company common stock. | | | d. An account receivable from a client. | | | e. "A desk used in the business and held more than one year" and "A computer used in the business, held more than one year, but fully depreciated under § 179 when acquired". | | | | Incorrect. An account...
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...TAX ON SHORT-TERM CAPITAL GAINS Introduction Gain arising on transfer of capital asset is charged to tax under the head “Capital Gains”. Income from capital gains is classified as “Short Term Capital Gains” and “Long Term Capital Gains”. In this part you can gain knowledge about the provisions relating to tax on Short Term Capital Gains. Meaning of Capital Gains Profits or gains arising from transfer of a capital asset are called “Capital Gains” and are charged to tax under the head “Capital Gains”. Meaning of Capital Asset Capital asset is defined to include: (a) Any kind of property held by an assesse, whether or not connected with business or profession of the assesse. (b) Any securities held by a FII which has invested in such securities in accordance with the regulations made under the SEBI Act, 1992. However, the following items are excluded from the definition of “capital asset”: i. any stock-in-trade (other than securities referred to in (b) above), consumable stores or raw materials held for the purposes of his business or profession ; ii. personal effects, that is, movable property (including wearing apparel and furniture) held for personal use by the taxpayer or any member of his family dependent on him, but excludes— (a) jewellery; (b) archaeological collections; (c) drawings; (d) paintings; (e) sculptures; or (f) any work of art. “Jewellery" includes— (a) ornaments made of gold, silver, platinum or any other precious metal or any...
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...Common transactions that result in a capital gain include the sale of stocks, bonds, and vacation homes. A tax on capital gains would be a certain percentage of the money that is withheld by the state. One of the most significant components of a capital gains tax is its resilience and ability to generate wealth for washington. According to budgetandpolicy.org capital gains are an abundant and rapidly growing economic resource in washington. In addition capital gains grew from 7.4 billion dollars in 2001 to 23.7 billion dollars in 2007 showing how capital gains can grow quickly over time with an annual growth rate of 21 percent. The capital gains tax resilience can be seen even during the great recession as in 2009, nearly six billion dollars were made from the sale of capital assets in the state at the time. As a result more than enough money can be made to meet the Mccleary mandate made by the supreme court in 2012 onto the state which according to The Joint Task Force on Education Funding,established by the legislature, estimates that it will take $1.4 billion in the next two-year budget cycle and $4.5 billion by 2017-19 to meet their obligations. In fact a capital gains tax with a five percent rate and a 10,000 dollar exemption with a five thousand dollar exemption to singles would generate over 500 million...
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...Computing Taxable Income 1. Tax Payable You will find this rule in …| Tax is payable on a person’s taxable income|Australia’s Tax Law decrees that every year ending 30 June, most people in Australia (and this includes companies) have to pay tax on an amount which the Tax Law calls the person’s “taxable income.” This amount – the person’s “taxable income” for that year – is the end result of a much longer series of steps which the Tax Law prescribes in detail.|s. 4-1| ||| Tax payable = taxable income x. tax rate|Once the amount of taxable income has been calculated, the Tax Law then applies a scale of Tax Rates to this amount in order to work out exactly how much tax the person has to pay for this year.|s. 4-10(3)| ||| Taxable income is assessable income minus allowable deductions|Our concern is not with the tax rates nor the amount of tax payable, but rather with the steps that lead up to finding the amount of taxable income earned during the year.Taxable income is defined in the Tax Law to be the difference between a person’s assessable income and deductions (reduced by losses made in prior years). So it is a two-step process – looking first at what amounts fall into assessable income, and then looking at what amounts are deductions.These are the two critical concepts that we want to examine:1. Which receipts and other amounts form part of a person’s assessable income?2. Which payments and other amounts are allowed as deductions?If we know the answers to these...
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