Mr. Chris's 2018 income and deductions are listed below. Calculated for the following two cases, Mr....
Mr. Chris's 2018 income and deductions are listed below. Calculated for the following two cases, Mr. Chris's Net Income for tax purposes and indicate any possible loss carryovers from the current year.
Case A
Employment Income.............................28,000
Income(loss) from Business..................(36,000)
Income from property .............................15,000
Taxable Capital Gains..............................21,000
Allowable Capital Losses ........................(27,000)
Subdivision E Deductions (spousal support)....(11,000)
Case B
Employment Income.......................16,000
Income (loss) from Business ..........(21,000)
Income from property........................22,000
Capital Gains ...................................64,000
Capital Losses ..................................(138,000)
Subdivision E Deductions (spousal support) ......(5,000)
Homework Answers
Allowable Business Investment Loss(ABIL) can be claimed against any type of income upto 50% of Business Investment Loss.
ABIL for Case A= 50% of 36000= 18000
ABIL for Case B= 50% of 21000= 10500
Remaining 50% can be carried forward for the future years or can be adjusted against any previous year
Carry forward amount for Case A= 18000
Carry forward amount for Case B= 10500
Allowable Capital Losses can be set off only against taxable capital gains. If losses are greater than gains, then remaining amount of losses can be carried forward to future years.
Case A
Allowable Capital Losses= 21000,
Income from Capital Gains = 21000- 21000= Nil
Carry forward= 27000-21000= 6000
Case B
Allowable Capital Losses= 64000,
Income from Capital Gains = 64000-64000= Nil
Carry forward= 138000-64000= 74000
Net Income:
Case A
Employment income 28000
Allowable Business Loss (18000)
Income from property 15000
Income from capital gains Nil
Gross income 25000
Less: Subdivision E (11000)
Deduction
Net taxable income 14000
Case B
Employment income 16000
Allowable Business Loss (10500)
Income from property 22000
Income from capital gains Nil
Gross Income 27500
Less: Subdivision E (5000)
Deduction
Net taxable income 22500
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