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Income from Property 6-1
oincome earned from invested capital
othis includes interest income, dividend income, rental income and royalties
ocapital gains are not considered to be income from property
Interest Income 6-2
- this is income earned from money put on deposit at a bank, or loaned to another person or
- Interest can be earned from:
oa private loan
oCanada Savings Bonds
oGIC or term deposit
omoney in a savings account
oCorporate bonds
- Interest income is taxable when receive
Interest Income 6-3
- Interest income is also taxable on a modified accrual basis for individual taxpayers
- This rule states that interest income must be recorded (accrued) at each anniversary date
of the investment (less any interest previously recorded when received)
Dividend Income Non –Eligible
- Dividends are cash received from the ownership of shares
- These are taxed in an unusual way
oCash received = $120
(Actual dividend)
oTaxable dividend
= 120 x 1.25 = 150
oDividend tax credit
2/3 x (150 – 120) = 20
Dividend Income – Eligible
Eligible Dividends have a different tax treatment
- Cash received = $120
- Taxable dividend
(Gross up)
=120 x 1.45 = $ 174
- Dividend Tax Credit
11/18 x (174 -120) = $33
Dividend Tax Credits reduce taxes payable.
Rental Income
- this is income received from renting property (usually real estate)
- a rental income statement is prepared each year to determine net rental income which is
total rental income minus rental expenses
CCA on Rental Properties 6-3b
- CCA deducted is limited to the rental income
- A rental loss cannot be created by the deduction of the CCA
- A separate CCA class is set up for each rental building (over $50,000)
Rental Income Example
Bldg A UCC $150,000
Class 1
Bldg B UCC 225,000
Class 3
Bldg A Bldg B
Rental Income $ 20,000 $ 27,000
Property taxes 3,500 4,500
Interest 7,000 10,000
Repairs 4,500 12,700
Insurance 1,700 1,900
16,700 29,100
ncome before CCA 3,300 (2,100)
Total Income before CCA 1,200
CCA Claimed 1,200
Net Rental Income NIL