ACCT-4021EL Chapter Notes - Chapter 6: Property Income, Tax Deduction, Intangible Property

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14 Oct 2018

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Chapter 6 i(cid:374)co(cid:373)e or loss fro(cid:373) a busi(cid:374)ess. Each of these basic types is determined on a net basis. Each amount that is to be included in net income for tax. Purposes is based on a specific group of inclusions that will usually be reduced by specific deductions. In general, the deductions applicable to one type of income cannot be deducted against the inclusions in a different type. Employment income is unique in that only individuals can earn this type of income. Business and property income, as well as capital gains, can be recognized by all taxpayers. Property property of any kind whatever whether real or personal, corporeal, incorporeal; this includes both depreciable and non-depreciable property, and tangible and intangible property. In general terms, there are three types of problems that can arise: For individuals, both business income and property income will generally be subject to the same rates.

Related Questions

Maxitech is a Canadian company. It has always used a December 31 year end. On January 1, 2016, the company had the following carry forward balances:

- Net Capital Losses 75,600

- Non-Capital Losses 51,400

- Unused Charitable Donations 4,600

During the 2016 taxation year, Maxitech's records show the following results (all amounts are based on the relevant tax rules):

- Net Business Loss 142,000

- Taxable Capital Gains 21,400

- Allowable Capital Losses 6,500

- Charitable Donations 3,200

- Dividends from Taxable Canadian Corporations 30,400

Required: Calculate the Corporation's minimum net income for tax purposes and taxable income for it's 2016 taxation year. Indicate any balances available for carry forward to subsequent years under each of the following assumptions:

A. It is the policy of the company to minimize net capital loss balances prior to using any other type of carry over balance.

B. It is the policy of the company to minimize non-capital losses prior to using any other type of carry over balance.

cerisemole158

Problem 17-37 (LO. 2)

During 2017, Gorilla Corporation has net short-term capitalgains of $15,000, net long-term capital losses of $105,000, andtaxable income from other sources of $460,000. Prior years'transactions included the following:

2013 net short-term capital gains	$40,000
2014 net long-term capital gains	18,000
2015 net short-term capital gains	25,000
2016 net long-term capital gains	20,000

If an amount is zero, enter "0".

a. How much is Gorilla's net capital loss for2017?
$

What is the amount of the capital loss deduction on Gorilla's2017 tax return?
$

Any excess net capital loss is carried back or forward as a.

b. Of the excess 2017 net capital loss, howmuch is carried back to the previous years?
$

c. Compute the amount of capital loss carryoverto 2018 and future years.
$

Indicate the years to which the loss may be carried. Select"Yes" or "No", which ever is appropriate.

2018
2019
2020
2021
2022

d. If Gorilla is a sole proprietorship, ratherthan a corporation, how would the owner report these transactionson her 2017 tax return?

Gorilla offsets $ of capital gains against her losses and anadditional $ in capital . The remaining $ is .

e. Assume that Gorilla Corporationâs capitalloss carryfoward in part (c) is $27,000 and that Gorilla will beable to use $11,000 of the carryover to offset capital gains in2018 and the remaining $16,000 to offset capital gains in 2019.

Assume the following:

A discount rate of 5%.

Present value factors - 1.000 for 2014-2016; 0.952 for 2018 and0.907 for 2020.

Gorilla Corporationâs marginal income tax rate is 34% for alltax years.

Round your computations to the nearest dollar.

In present value terms, determine the tax savings of the$105,000 long-term capital loss recognized in 2017.
$

Jeff is a coin collector who owns several valuable sets ofcoins. He sold one of the sets of coins on January 27, 2016 for$4,500,000. He had acquired the set three years earlier for$3,900,000.

On February 23, 2016, Jeff sold a block of stock for $630,000that he had purchased in 1996 for $230,000. On April 6, 2016 Jeffsold another block of stock for $165,000. He had bought theseshares on July 20, 2015 for $265,000. The coin set and the twoblocks of stock were the only assets that Jeff sold in 2016. Noadjustments in basis have been made to any of the assets that Jeffsold in 2016. Jeff is not a dealer in stocks or in coins.

Jeff's only other income in 2016 (other than gains on the salesof assets) was a salary of $300,000 and rental income (net ofexpenses) of $100,000. He is single with no dependents and he doesnot itemize his deductions.

a. Compute Jeff's recognized gains or losses on the coins andthe two blocks of stock. Indicate the character of the gains andlosses (ordinary or capital)

b. Compute Jeff's taxable income for 2016, recalling that thededuction for personal exemptions is fully phased out for a personwith Jeff's level of income.

c. Compute Jeff's income tax for 2016 taking into account thefact that some of the gains on the asset sales will be taxed atspecial lower rates.

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ACCT-4021EL Chapter Notes - Chapter 6: Property Income, Tax Deduction, Intangible Property

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