RSM324H1 Lecture 7: Chapter 07
Document Summary
Income from property defined: return on invested capital where: little or no time, labour or attention has been expended. Includes the following: dividends - on capital shares of corporations. Interest loans, deposits etc: rental income real estate or other tangible property, royalties patents, mineral rights, etc. Income from property defined: propert(cid:455) i(cid:374)(cid:272)o(cid:373)e is the a(cid:374)(cid:374)ual or regular retur(cid:374) re(cid:272)ei(cid:448)ed for allo(cid:449)i(cid:374)g a(cid:374)other part(cid:455) to use o(cid:374)e"s property, does not include capital gain or loss. General rules for determining property income: property income = profit therefrom, reflects the net concept: Expenses incurred to earn property income are deductible if: Incurred to earn taxable property income [18(1)(a)]: not capital in nature [18(1)(b)], not a reserve [18(1)(e)], not a personal or living expense [18(1)(h)]; and, are reasonable under the circumstances [67], a. The deduction of interest expense: deductible if loan was incurred to purchase investments to earn property income. Must establish purpose of loan: maintain separate accounts, principles for maximizing.
