Taxation 1 – Assignment 1

Q1) 1-7 Net Income for Tax Purposes
Case A:
Income Under ITA 3(a) Employment Income $46,200 Business Income $13,500 Property Loss (see ITA 3(d) below) NIL $59,700
Income Under ITA 3(b) Taxable Capital Gains $14,320 Allowable Capital Losses ($23,460) NIL
Balance from ITA 3(a) And (b) $59,700
Subdivision e deductions ($4,800)
Balance under ITA 3(c) $54,900
Deduction Under ITA 3(d):
Property Loss ($2,350)
Net Income for Tax Purposes (Division B Income) $52,550

As the Gambling winnings and losses related to an occasional gambling habit, the income is non-taxable and the losses non-deductible. There will be an allowable Capital Loss carry over of $9,320 (14,320 – 23,460 = )

Case B:
Income Under ITA 3(a) Employment Income $64,000 Business Income (see ITA 3(d) below) $NIL Interest Income $ 2,600
Property Income $ 4,560 $ 71,160
Income Under ITA 3(b) Taxable Capital Gains $32,420 Allowable Capital Losses ($29,375) $ 3,045
Balance from ITA 3(a) And (b) $ 74,205
Subdivision e deductions ($12,480)
Balance under ITA 3(c) $ 61,725
Deduction Under ITA 3(d):
Business (50% of partnership) ($72,470)
Net Income for Tax Purposes (Division B Income) $NIL

There is no Capital Loss to carry over as the Capital Gains exceeded the Capital losses in the year, using up the entire deduction. There will be a business loss carry over of $10,745 (61,725 – 72,470 = ) resulting from the partnership loss.

Q2) 2-3 Individual Tax Instalments
Case 1: Use alternative 3
2012 - 18,400-15,100 = 3,300
2011 – 16,200-12,900 = 3,300
2010 – 13,500-11,200 = 2.300

Instalments one and two would be 2300/4 = 575 each March 15 and June 15
Instalments three and four would be 3,300 – (50% of