AFM362 Lecture Notes - Lecture 14: Real Estate Transfer Tax, Accrued Interest
29 Jun 2018
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Department
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Professor
There's a capital gains
exemption of up to $835,714 (2017) of capital gains on qualifying shares
of a small business
corporation and 1m on certain farming and fishing property.
•
Capital gains deduction
BILs are capital losses that are given special treatment as an incentive for investing in small
business
•
BILs are capital losses which occur on the disposition of either
shares or debt
of a small business
corporation
•
Used to carry on an active business primarily in Canada
○
Shares or debt of connected small business corporations
○
A combination of the above two points
○
A small business corporation is a CCPC where all of the fair market value of its assets are:
•
BIL is still a capital loss so subject to the inclusion rate of 50%, and its called an allowable business
investment loss (ABIL).
•
Business investment loss
Computation of capital gains and capital losses
Proceeds of disposition minus
1)
Adjusted cost base, and
a.
Expenses of the disposition
b.
The aggregate of:
2)
A gain on the disposition of property is determined as
Remember that if a loss came from depreciable capital property (those allowed CCA) it is denied
by the Act since the total decline in value should have been accounted for through the CCA
system, if applicable
•
A loss is a negative amount from the calculation of the above formula
It is the value of the consideration received or receivable
•
For a deemed disposition, the proceeds usually will be deemed to be the fair market value of the
property at the time of the disposition
•
Proceeds of disposition
ACB starts with the actual out of pocket cost or deemed cost on receipt of a gift or inheritance and
is then modified
•
e.g. the cost of property received as a dividend in kind is the fair market value of the
property received
○
The cost base is established as amounts in respect of the value of the property which have been
included in the taxpayer's income
•
The employment income inclusion arising from the acquisition of share through a stock option is
added to the cost of the share
•
The cost base of a bond is reduced by the amount of accrued interest paid for on the purchase of
the bond and this accrued interest is deducted from interest earned during the holding period of
the bond
•
Adjusted cost base
The cost base of shares is increased by deemed dividends that arise in transactions where the paid
up capital (par value) of the corporation is increased by more than the increase in FMV of the net
assets of the corporation
•
The cost base of shares received as consideration for any transfer of property to a corporation is
increased by the amount of any capital loss denied by reason of a "stop
-
loss" rule applied on the
transfer
•
Some adjustments in respect of shares of a corporation:
Adjustments to cost where assets are transferred without any consideration:
AFM 362 Page 3
Document Summary
There"s a capital gains exemption of up to ,714 (2017) of capital gains on qualifying shares of a small business corporation and 1m on certain farming and fishing property. Bils are capital losses that are given special treatment as an incentive for investing in small business. Bils are capital losses which occur on the disposition of either shares or debt of a small business corporation. A small business corporation is a ccpc where all of the fair market value of its assets are: Used to carry on an active business primarily in canada. Shares or debt of connected small business corporations. Bil is still a capital loss so subject to the inclusion rate of 50%, and its called an allowable business investment loss (abil). A gain on the disposition of property is determined as. A loss is a negative amount from the calculation of the above formula.
