Canadian Tax Principles, 2022-2023, Vol 2 (Byrd/Chen) (Answers at the end of each chapter)
Chapter 11
11.1 Online
... [Show More] Exercises
1) ITA110.2providesforadeductionof"lump-sum payments",forexampleacourtorderedtermination benefit.Whataxpolicyobjectiveisservedbythisprovision?
Answer:Suchlump-sum paymentsoftenreflectcompensationforservicesrenderedoverseveralyears. Thefacthatitisreceivedinasingleyearcanresultinsignificantportionsofitbeingsubjectoincometax rateshigherthanwouldhavebeenthecasehaditbeenreceivedovertheseveralyearsduringwhichitwas earned.Thedeductionofsuchamountsprovidesthebasisforanalternativeincometaxpayable calculationwhichatemptstoadjustheamountpaidtotheamounthatwouldhavebeenpaidifthe amounthadactualybeenreceivedoverseveralyears.Theobjectiveofsuchprovisionsisfairnesor equity.
Type:ES
Topic:Lump-sum payments-ITA110.2
2) Thecaryoverperiodsforlosesvarieswiththetypeoflos.Brieflydescribethecaryoverperiodsthat theITAprovidesforthetypesoflosesthatitidentifies.
Answer:ThecaryoverperiodsforthevarioustypesoflosesidentifiedintheIncomeTaxActand coveredinthetextuptoChapter11areasfolows:
•Non-CapitalLosesandFarm Loses(includingrestrictedfarm loses):20yearsforwardand3years back.
•NetCapitalLos:Unlimitedforwardand3yearsback
•ListedPersonalPropertyLoses:7yearsforwardand3yearsback.
•AlowableBusinesInvestmentLoses:10years,asanon-capitalosthenconvertedtonetcapitalos withunlimitedcaryforwardinyear11.
•ForeignTaxCredits:10yearsforwardand3yearsback.
CoveredinChapter18arelimitedpartnershiploses.Theyhavenocarybackandanunlimitedcary forward,butonlyagainsthepartnershipincometowhichtheyrelate.
Type:ES
Topic:Loscaryovers-generalconcepts
3) Whenabusineshasseveraltypesofloscaryovers,whyisitnecesarytokeepseparatebalancesfor eachtype?
Answer:Therearetworeasonsforhavingtotrackeachtypeofloscaryforwardseparately.First, differentypesofloseshavedifferentcaryoverperiods(e.g.,20yearsforfarm losesvs.unlimitedfor capitaloses).Second,sometypesoflosescanonlybeap liedagainstheequivalentypeofincome (e.g.,capitalosescanonlybecariedoverandap liedagainstcapitalgains).
Type:ES
Topic:Loscaryovers-generalconcepts
4) Taxadvisorswilnormalyrecommendthatloscaryoversnotbeusedtoreducetaxableincometonil foranindividual.Whatisthebasisforthisrecommendation?
Answer:Thisrecommendationreflectsthefacthatmostpersonaltaxcreditsarenon-refundableand can otbecariedovertootheryears.Thismeansthat,unles anindividualtaxpayerhastaxableincome andfederalincometaxpayable,thevalueofthesecreditsissimplylost.This,ineffect,iswhatwould hap enifvarioustypesofloscaryoverswereusedtoreducetaxableincometonil.
Type:ES [Show Less]