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ADMS 3520 Chapter Notes - Chapter 6: Property Income, Fiscal Year, Deferral

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School
York University
Department
Administrative Studies
Course
ADMS 3520
Professor
Thaddeus Hwong

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Document Summary

The word business includes a profession, calling, trade, manufacture or undertaking of any kind whatever an adventure or concern in the nature of trade but does not include an office or employment. It is necessary to distinguish between: business income and employment income business income and property income business income and capital gains. The reason is that in arriving at the business income, business income incurred can be deducted while it is not so while arriving at the employment income and there are few restrictions in arriving at property income. Capital gains are only taxed at 50% and the capital loss can be only deducted against capital gains. How to identify whether a particular income is business income or from capital gain. Intent and the course of the conduct: number and frequency of the transactions, relationship to the taxpayer"s business, supplemental work on the property, nature of assets, objectives defined in the articles of association.

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Related Questions

The following cases makes different assumptions with respect tothe amounts of income and deductions of Mr. Michel Daigle for thecurrent taxation year under the various subdivisions of Division Bof the Income Tax, and the last two previous years’ taxespayable:

Case 2-A

Employment Income

$35,000

Income (Loss) From Business

(10,000)

Income From Property

12,000

Taxable Capital Gains

42,000

Allowable Capital Losses

(18,000)

Subdivision E Deductions (Spousal Support)

(4,000)

Taxable Income Previous Years:

2016: $10,000

2017: nil

Case 2-B

Employment Income

$33,000

Income (Loss) From Business

(39,000)

Income From Property

14,000

Taxable Capital Gains

36,000

Allowable Capital Losses

(42,000)

Subdivision E Deductions (Spousal Support)

(7,000)

Taxable Income Previous Years:

2016: $10,000

2017: $8,000

Required: For Both cases, calculate Mr.Daigle’s Net Income for tax purposes, indicate any possible losscarryovers from the current year, taxes payable for current year,and calculate require installment payment for current year.

(assume Federal rate of 15% and Provincial Rate of 7%)

1. Distinguish between allocation andapportionment.

2. What is the three-factor formula, and how is itcalculated?

3. Describe the two tests that are often utilized todetermine whether income is business income.

4. Why would a state want to characterize a business as aunitary business?

5. How do you determine whether a business is a unitarybusiness?

6. How are S corporations taxed by states?

7. What are the competing interests of businesses andstates with respect to e-commerce?

8. What is a composite income tax return?


The govt of bigtown is concerned about its revenues. It hasincreased it tax rate from 2.2% to 2.8% fr companies with netbusiness income exceeding $2M while at the same time reducing therate from 2.2% to 1.9% for companies with net business incomebetween $1M and $2M. Companies with less than $1M net businessincome are not taxed. Requirements: For each of the following 4situations: a, determine total projected govt revenues before andafter the tax increase. b, explain in couple of sentences whetherand why you consider this good or bad tax policy. Situation 1: Thetotal amount of net taxable business income for companies withincome exceeding $2M remains static at $50M and net taxable incomefor companies with income between $1M and $2M remains static at$100M for the entire town. Situation 2: total amount for the nettaxable business income decreases from $ 50M to $48Mfor companieswith income exceeding $2M due to business moving to a differentjurisdiction. The net taxable income for companies with incomebetween $1M and $2M remains static at $100M. Situation 3: the totalamount of net taxable income for businesses with income exceeding$2Mdecreases from $50M to $45M ue to bsiness moving to differentjurisdiction. However, total taxable income for companies withincome between $1M and $2M increased from $100M to $110M. Situation4: total amount of net taxable business income for businesses withincome exceeding $2M decreases from $50M to $47M due to businessmoving in different jurisdiction. However, total taxable income forcompanies with income between $1M to $2M increased from $100M to$120M.