RSM324H1 Lecture Notes - Lecture 5: Property Income, Capital Cost Allowance, Life Insurance
Document Summary
Property, with ability to provide long-term benefit, may be considered business or capital in nature. Depending on the reason for acquisition & subsequent use: the gain or loss on the sale can be either: Distinction between the two sources is important: Capital treatment can be distinguished from business treatment by employing the following guidelines: Limitations may conflict with well-established business principles and gaap. The ita takes precedence: c. general limitations to business profit determination. Expenses are deductible only if the following conditions are met: income-earning-purpose test, capital test, exempt income test, reserve test, personal expense test, reasonableness test, 1. Income-earning-purpose test: must be incurred for the purpose of gaining, producing, or maintaining income from business, expenses incurred in carrying on a business activity with an expectation to profit, primary test for the deductibility of expenses. If no reasonable expectation of profit, expenses are deductible only to the extent of related revenue: 2.
