Tax 2011 Chapter 10

10. Gains/Losses are "generally" recorded at the same amount for both Capital Accounts and Tax Basis.

Under Canadian Tax Law, there is an election for companies to defer recaptures and capital gains of property that was involuntarily or voluntarily disposed of. In this research paper, we attempt to prove that the election is a useful taxation strategy for businesses so that they are not subject to pay taxes on capital gains or recaptures until such a time where they may acquire an eligible replacement property that will help them earn business income. We will provide facts, definitions, and examples to illustrate the use of this election throughout the paper by explaining the capital cost allowance system, the offset available to business for capital gains and recaptures, the election process, the rules regarding replacing former business

25-7 If a loss cannot be accrued in the period when ti is probable that an asset had been impaired or a liability had been incurred because the amount of loss cannot be reasonable estimated, the loss shall be charged to the income of the period in which the loss can be reasonably estimated and shall not be charged retroactively to an earlier period. All estimated losses for loss contingencies shall be charged to income rather than charging some to income and others to retained earnings as prior period adjustments.”

Whether certain allocations of partnership income, gain, loss, deductions, and credits have substantial economic effect and whether that has any impact on the partners’ distributive shares.

The legislative grace concept dictates that business expenses are grouped into certain categories that include d.

In 2013 Marianne sold land, building and equipment with a combined basis of $150,000 to an unrelated third party and in return received an installment note of $80,000 per year for five years. Of the $250,000 gain on sale, $150,000 was classified as Section 1245 gain and the remaining $100,000 was Section 1231 gain. In 2013, Marianne had a capital loss carryover of $60,000, $50,000 of which she used to offset her Section 1231 gain; she recognized no Section 1245 gain. The following year she recognized $40,000 of 1245 gain and $10,000 of Section 1231 gain which she promptly offset with the last $10,000 of the capital loss carryover. In 2015, she recognized $50,000 Section 1245 gain and no Section 1231 gain.

Tax rate schedules are provided for use by (relatively) higher income taxpayers while the tax tables are provided for use by (relatively) lower income taxpayers.

a. What is the authoritative guidance for asset impairment? Briefly discuss the scope of the standard (i.e., explain the types of transactions to which the standard applies)

There presents some positive evidence to avoid the recording of valuation allowance. First, Packer, Inc has a profitable operation history from 1995 to 1997, despite a significant loss in 1994. This is agreed by FASB, which states that a “strong earnings history coupled with evidence indicating that the loss (for example, an unusual, infrequent, or extraordinary item) is an aberration rather than a continuing condition” is a piece of positive evidence (FASB 740-10-30-22). These profits may be carried forward into the future to offset net-operating loss. Secondly, Packer may not generate any significant U.S Federal tax net operating loss carry forwards in the near future because it has the ability to utilize tax planning, such as capitalization of R&D. Thirdly, Packer has never lost deferred tax benefits due to expiration of a US net operating loss carry-forwards.

The term capital gain is often associated with the wealthy or corporate entity. However, every single tax payer can receive a capital gain. Whenever you sell an item for more than you paid for it, you are earning a capital gain. That gain, the amount of money you made on the transaction, is subject to the capital gain tax. This means that the government has the right to tax a percentage of that money you earned. The sale of many different items can result in a capital gain, including stocks, investments, personal property, and homes or residences. As an example, if you purchase a used car for $1,000 and then sell that car for $5,000, you have made a capital gain of $4,000. However, any fees you paid toward that vehicle will be considered. If you restored the car, spending $2,000, that amount is decreased from your total capital gain amount.

The first thing to clarify is that there are both positive and negative externalities on the effect of taxation on capital gain. Timing to realize the capital gain is paramount since in the United States long-term gains (typically 1 year or more) will be taxed at a significantly lower rate than ordinary

In this scenario, Suzette had purchased a farm earlier 25 years ago wherein she was exempted to pay CGT (Capital Gain Tax), as CGT was implemented from 20 September 1985. She sold this farm on 1 July 2010. Here the income she earned by selling the farm comes under CGT. With an intention to retire to New South Wales

Another argument in favor of the preferential tax treatment of long-term capital gains is that capital gains are not recognized annually during the years gains are being accrued. Rather than requiring taxpayers to value their capital assets annually and include the change in value in their taxable income, long-term capital gains are taxed only when realized (Slemrod & Bakija, 2008). By waiting to recognize the gain at one time during the specific year the gain is realized, the taxpayer risks being taxed at a higher rate. This is due to the progressive design of the tax rate system. Jones and Sommerfeld (1995) contended that had the gain been taxed in increments as the asset appreciated in value, being taxed at a higher rate may have been avoided. The preferential tax rate on long-term capital gains offsets the artificially high tax caused by taxing the accumulated gain all at one time (Jones &

The treatment of tax losses is a crucial part of The Basic Tax Equation (ITA 2007). A net loss is created when the annual gross income of a tax payer is less than their total deductions. As part of the basic tax equation, available tax losses are subtracted from net income to give the taxable income” (Alley, et al., 2014).

Financial accounting uses the accrual concept whereby the results of transactions are recorded when or as they occur instead of only when cash is received or paid. On the other hand, the taxation authorities taxes entities on the earliest of accrual or receipt. The difference in the accounting and tax treatments of different transactions may therefore result in an entity’s profit/loss before taxation for a period (or year of assessment) being different from the entity’s taxable income/loss for that period (or year of assessment).