Listed Personal Property Dispositions

Listed personal property (LPP) is a personal-use property that meets the definition of an LPP under section 54. Listed personal property gains and losses follow the same basic rules as personal-use property with the exception that capital losses may be deducted against capital gains on LPP. Gains and losses must first be calculated with the […]

Personal-Use Property Dispositions

To simplify the system and avoid onerous record-keeping, the Income Tax Act deems that both proceeds of disposition and ACB are a minimum of $1,000. This is known as the de minimums rule and it applies only to personal-use property, including listed personal property. Under this rule: Proceeds of disposition are the greater of actual […]

Restricted CCA – Leasing Business

For business involved in the leasing of equipment or any movable property, CCA is restricted to the extent of net lease income, unless the taxpayer’s principal business involves the rental or lease of property, and income is earned in a corporation or a partnership.   Concluding Concepts to Remember Property income is included in paragraph […]

Restricted CCA – Rental Properties

In determining net rental income (which is property), capital cost allowance (CCA) cannot be used to create or increase an operating loss. This restriction applies to the total net rental income, and does not apply on a property-by-property basis where the taxpayer has more than one rental property. The Act contains rules that prevent a […]

Rental Income

Rental income (losses) generally refers to the income or loss earned from ownership of properties that are rented/leased to another person. Generally, rental income is income from property. There are a few exceptions where it would be considered business income, including: A corporation employing six or more full-time employees whose principal business is to earn […]

The Capital Cost Allowance System

For accounting purposes, it is generally acceptable to amortize or deplete the asset and reflect the cost of the asset in the determination of net income. The objective of amortization, for financial statement accounting purposes, is to match the cost of producing the revenues to net income. Little attempt is made to compute the present […]

The Provisions of Section 20

Act Reference Deductions Allowed Related Subsection or Deduction Paragraph 20(1)(a) Capital cost allowance Sections 18(1)(b), 13, Regulations Paragraph 20(1)(b) Cumulative eligible capital Section 14 Paragraph 20(1)(c),(d) Interest and compound interest Section 18(1)(t), 18(2), 18(11), 20.1 Paragraphs 20(1)(e), (f), (g) Financing expenses and share transfer fees Subsection 18(11) Paragraph 20(1)(e2) Life insurance premiums as collateral   […]

Unpaid Amounts

For non-arm’s length persons (related persons), where a deductible expense is unpaid at the end of the second taxation year following the year of accrual, the amount must be added back to income at the beginning of the third taxation year. Alternatively, a joint agreement (Form T2047) may be filed with the creditor and the […]

Prepaid Amounts

Prepaid amounts that relate to goods and services to be received or benefits expected to be derived in a future taxation year are deductible in the taxation year in which the goods or services are received or benefit derived. Subsection 18(9) concurs with the general rule that expenses must be incurred to earn income in […]

Food, Beverages and Entertainment

Section 67.1 restricts a deduction for food, beverages, and entertainment (including the amounts for food and beverages while attending a conference, convention, or similar function) to the lesser of: 50% of the amount paid or payable; or A reasonable amount. The rules provide exceptions for: Airlines, restaurants, and hotels that offer this service to their […]