Test Bank for Byrd & Chen's Canadian Tax Principles, Edition + Volume 1 and Volume 2 + Study Guide + Access Card Paperback – August 20, 2023 by Gary Donell||ISBN:9780138177287

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Byrd & Chen's Canadian Tax Principles
1st Edition. Volume 1, Volume 2 by
Clarence Byrd, Ida Chen. ISBN-13:
9780137856527

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Chapter 11


11.1 Online Exercises

) ITA 110 . 2 pro v id esf or aded u ctio n of " lump- sum
1
p ay ments", fo r ex am p le a co u r to r d er e d ter m i n at i
on
b en ef it. Wh a ta x p o l ic y o b je c t iv e i s s e r v e d b y th i s
provision?
An sw er : Su ch lu m p - sum
p ay mentsoftenr eflectcom pen sationfor ser vicesr
end eredo versev eraly ears.
Th ef ac th a titisr ece iv ed in a sin g ley ear can re su l
tin sig n if ican tpo r tion so f itb eing su bjecto in co m
etax
r ateshigher th an wo uld hav eb een thecaseh ad itb ee
n r ece iv ed o v er th e s ev er a ly ear sd u r in g w h ich itw a
s
earn ed . T h e d e d u c t i o n o f s u c h a m o u n t s p r o v id e s t h e
b a sisfo ran altern a tiv e in co me tax p ay ab le
calcu lationw h ichatemptsto adju sth eamo untpaid
totheam oun th atw ou ldh av eb eenp aidif the
amo unthadactualyb eenreceiv edov ersev er alyear
s. T h e o b j e c t i v e o f s u c h p r o v i s i o n s i s f a ir n e s o r
equity .
Type: ES
Top ic: Lu mp - sum p ay men ts - ITA 110 . 2


) T h e c ar y o v e r p er io d sf o r lo s e sv ar ie s w ith th e ty
2
p eo f lo s. Br ief ly d escr ibeth ecar y o ver p er iod sth
at
th eI T Ap r ovid esf o r th ety p eso f lo ses th atitid en
tifies.
A n sw er : Th ecar y o v er p er io d sf o r th ev ar io u s ty p e s o
f lo s e s id e n tif ie d in th e I n co m e T a x A ctan d
co v er ed in thetex tu p to Ch ap ter 1 1 area sfo lo ws:
• N o n - Ca p ita l Lo sesan d F arm
L o se s( in c lu d ing r e str ic te d f a r m
lo se s) : 2 0 y e ar sf o r w ar d a n d 3 year s back.
• Ne t Ca p ita l Lo s: Un l i m i t e d f o r wa r d a n d 3 y earsb ack
• Listed Per so n al Pr op erty Loses: 7 y ear sf o r w ar d an
d3 y ear sb ac k .

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• Alo wa b le Bu sin e s I n v e st m e n t Lo se s : 1 0 y e a r s, asa
n on - cap italo sth en co nver ted to n etcap italo s
with u n limited car y f o r war d iny ear 1 1.
• Fo re ig n Tax Cr e d it s :1 0 y e a r sf o r wa r d a n d 3 y e ar sb a
ck.
C o v e r e d i n C h a p t e r 1 8 ar elim ited p ar tn er sh ip lo ses.
Th ey h av en o c ary b a ck an d an u n l i m it ed c ary
for w ard, buto nly ag ain sth ep artner sh ip in com eto wh
ichtheyrelate.
Type: ES
To p i c : Lo s c a r y o v e r s - g eneralconcepts


) W h e n ab u s in e sh a s s ev er alty p e s o f lo s car y o v er s
3
, wh y i s i t n e c e s a r y to k e e p s ep a r a t e b a l an c e s f o r
eachtype?
A n sw er : Th er ear e tw o r ea so n s f o r h av i n g to tr a ck ea c
h ty p e of lo sc a r y fo r wa r d se p a r a te ly . Fir st,
d iffer en typ eso flo sesh aved iffer en tcaryo ver per io
ds(e. g., 20 y e a r sf o r f arm lo sesv s. u n l im i t ed f o r
c a p ita lo s e s ) . Seco n d, s o m e ty p e s o f lo s e s c a n o n ly b
eap l ie d a g a i n s th e e q u i v a le n ty p e o f in c o m e
( e. g. , cap italo ses can o n ly b ecar ied ov er an d ap
li ed ag a in st cap i ta lg a i n s) .
Type: ES
To p i c : Lo s c a r y o v e r s - g eneralconcepts

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) T ax ad v i so r sw il n o r m aly r e co m m en d th at lo sc ary
4
o v er sn o tb eu s ed to r ed u c e ta x ab lein c o m e to n il
f o r a n in d iv i d u a l. W h a t i s th e b a s i s f o r th i s r e c o m m
endation?
An s we r : Th i s r e c o m m e n d a t io n r e f l e c t s th e f a c th a t
m o s tp e r s o n a l ta x c r e d it s a r e n o n - r ef u n d a b le a n d
can
o tb e c a r ie d o v e r to o th e r y e a r s . T h is m e a n s th a t, u
nles a n i n d i v id u a l t a x p a y e r h a s t a x a b l e in c o m e
an d f ed er a lin co m e tax p a y ab le, th e v a lu eo f th e s e
cr ed its i s s im p ly lo s t. Th is, in ef f ect, is w h a tw o u
ld hap
en if v ar io u s ty p e s o f lo s ca r y o v er s w er eu s ed to r e
du cetax ab lein co metonil.
Type: ES
To p i c : Lo s c a r y o v e r s - individual


) Br ieflyd escrib eth ein cometax tr eatm en tof lo s
5
eson listedp erso nalpro perty .
An s we r : Lo s e s o n l i s t e d p e r s o n a lp r o p e r ty c a n b e d e
d u ct ed d u r in g th e cu r en ty e ar , b u to n ly ag a in stn et
g a in so n li s t e d p e r so n a lp r o p e r ty fo rth e y e a r . Ift
h e lo s can o tb eu s e d d u r in g th e c u r e n ty e ar , itcan b e
car ied b ack th r eey ear so r f o r war d sev en y ear s.
Type: ES
T o p ic: L o s e s- list ed p er so n alp ro p erty


) Ifa tax p ay erh a sb o th n etc ap ita lan dno n -
6
c a p ita lo se sa n d d o e sn o th av e su ff ic ie n tin co m e i
nthe c u r e n t an d p r ev io u s y e a r s to c l a im
th e se a m o u n t s, wh ic h ty p e o f lo s sh o u ld b e d e d u c
ted first?
A n s w er : T h e r e is n o c le a r c u ta n s w e r t o th i s q u e s ti o
n. N e tc a p i ta lo se sh a v e a n u n lim i te d l if e b u tc a n
o n ly b ecar ied ov er to th eex ten to f n etax ab lecap it
a lga in sin th ec aryo ver p er iod.

T h iswo u ld su g esth at, ifnetax ab lecap italg ain s
a r ep r e sen tin th e cu r en ty ea r , th eu se o fn e tcap it
al
l o s e s s h o u l d r e c e i v e p r i o r i t y . T h is w o u ld b ep ar t