Study Guides (247,988)
Canada (121,207)
Finance (30)
FINA 210 (6)
All (3)

Lesson 6.docx

4 Pages
Unlock Document

FINA 210
All Professors

Lesson 6 The Tax Environment1 DefinitionGovernments on all levels municipal provincial and federal tax the equity owner on income and capital gainsThe taxes on income are for money made on rents received from tenantsThe taxes on capital gains wealth are for gains for selling a propertyIn addition certain municipal governments oblige equity owners to pay taxes The buyer pays a welcome tax and the seller pays a goodbye tax2 Canadian Taxation Old and New RulesFew industries will be as severely affected by tax reform as the real estate development industry The rationale behind the proposed changes is spelled out very clearly in the governments Tax Reform papers in the following comments The nature of real estate is such that it can be largely debtfinanced In addition vacant land is often held for several years before it is sold and real estate property may take long to construct As a result the carrying cost of unused land and soft costs attributable to building construction often represent a significant portion of the cost of the property while the related income is not earned for several years The effect of this mismatching of revenues and costs is to permit these costs to shelter other income from taxThe new rules apply to vacant land carrying charges and construction period soft costs incurred after December 31 1987 In this lesson we will look at some of the changes on and before December 31 1987 and after December 31 1987We will refer to the rules on or before December 31 1987 as the old rules and after December 31 1987 as the new rulesOnbefore December 31 1987After December 31 1987Class 3 CCA rate 5Class 3 CCA rate 4Declining balance methodDeclining balance methodFullYear Rule if Half Year does not applyHalfYear RuleCapital Gains 75 to 6667Capital Gains 50No putinusePutinuse in effect3 Capital Cost Allowance CCAThe Capital Cost Allowance CCA is a depreciation method under Canadian tax law which allows for the accelerated writeoff of property under various classificationsThe Capital Cost Allowance CCA rate applicable to buildings in Class 3 will be reduced from the current 5 to 4 on a declining balance basis effective for acquisitions after 1987 These rules will not apply to buildings acquired after December 31 1987 and before 1990 pursuant to an obligation in writing from Revenue Canada where the property was under construction on June 18 1987Special transitional rules will also apply to the cost of post1987 additions and alterations to a 5 rate buildingPutinusePutinuse means that all costs are capitalized to year 0 when the building is constructed and ready to be occupiedThe new putinuse rule applies in order for the capital cost allowance on buildings not to be available
More Less

Related notes for FINA 210

Log In


Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.