The following cases makes different assumptions with respect to the amounts of income and deductions of Mr. Michel Daigle for the current taxation year under the various subdivisions of Division B of the Income Tax, and the last two previous years’ taxes payable:
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 loss carryovers 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%)
Answer
CASE 2-A
Given
Employment Income=35000
Income loss from business=(10000)
Income from houseproperty=12000
Taxable capital gain 42000
Allowable capital losses=(18000)
Subdivision E deduction=(4000)
* capital loss is a allowable expense from capital gain and hence deductable.
Mr diagles net income for tax purposes:-
Enploymemt income | 35000 | |
Less | Income loss from business | (10000) |
Add | Income from property | 12000 |
Add | Taxable capital gain | 42000 |
Less | Allowable capital loss | (18000) |
Less | Subdivision E deduction | (4000) |
Total income for tax purposes:- | 57000 |
Possible loss carryover
In case 2-A there is no possible loss carryover ,all are set off against income.
Tax payable case 2-A
federal rate=15%=57000×15%=8550
Provincial tax=7%=57000×7%=3990
Tax payable= 8550+3990=12540
Case 2-B
Employment income | 33000 | |
Income from property | 14000 | |
subdivision E deduction | (7000) | |
Total income for tax purposes:- | 40000 | |
*Capital gain loss carryover=(42000)-36000=(6000)
*loss from bussiness can not be set off from employment income
*loss of business income of 39000 can be set off from previous year taxable income=39000-10000-8000=21000( total loss carryover next year)
*Tax payable
federal tax=15%=40000×15%=6000
Provincial tax=40000×7%=2800
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