AFM202 Study Guide - Final Guide: Pro Rata, Property Income, Capital Asset
Final exam part 2
CORPORATIONS
• Corporation can have any fiscal year end and tax return is due 6 months from the fiscal year
end.
• Tax owed must be paid within two months of year end or 3 months for CCPC. Interest will
be charged if not.
• If a corporation owes more than $3000 than it must make monthly instalment. Same 3
method of calculating except this is out of 12 instead of 4.
CCA
• Terminal losses can be a deduction from business or property income but are not allowed
to deduct from employment income. Just like how expenses incurred for employment
income are not allowed.
• CCA on a rental property may be claimed, subject to the maximum CCA described above,
up to the amount of total rental property income from all rental properties owned by the
taxpayer. (shown in problem 400)
• Most costs related to a building, and the land under and surrounding a building, incurred
duig ostutio of the uildig ae ot dedutile. These osts alled soft osts,
including interest, property taxes and insurance, are capitalized.
• Exceptions: landscaping and disability related modifications
• If rental income is earned from a portion of the building under construction, then expenses
up to the amount of the rental income earned can be deducted by the taxpayer in the year
• Under the half-net rule only one half of the net addition (purchase- disposition) is added to
UCC balance for the purpose of calculating CCA.
• The remaining one half is added to UCC after the year-end.
• Daily proration of CCA is required for short taxation years which can only be either the first
or last year of a business.
• This proration is separated from the half net rule and only applies to CCA on assets used to
earn business or property income earned by a corporation. Not on individual asset used to
earn property or employment income.
• Proration uses 365. E.g. a business commencing operation on Sep 1st 2016 and have a Dec
31st ea ed the the fist ea’s CCA ill e poated: ultiplied /
• A short taxation year will also affect the small business deduction annual business limit and
the SR&ED expenditure limit.
Capital gain/loss
• Capital property is defined as depreciable property, therefore loss on land is not a capital
loss, and any property when disposed will result in a capital gain or loss but not business
gain or loss, therefore inventory loss is not a capital loss.
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