Tax Consequences and Risk Factors Associated with Mining Operations

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

The 1301 1031 tax exchange refers to the exchange of real property that is “like-kind” (Reg.§1.1031(a)-1(b).

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.

Although the grantor trust rules generally address the taxability of trust income to the grantor, in some situations the Clifford trust doctrine has been extended to tax the income of a trust to someone other than the grantor. This happens when the powers granted enable a beneficiary to vest the corpus or income in the beneficiary. The seminal case of Mallinckrodt v. Nunan held that income of a trust was taxable to a beneficiary

This year, you sold your former primary residence (which was purchased in 2010), and were concerned about the tax effects that this sale would have on your return. Although the sale of your home resulted in a realized gain, it will not increase your gross income on your 2014 tax return. This is because the amount of gain you earned on the sale falls inside the allowable excludable limit offered for taxpayers selling their personal residences. Additionally, though taxpayers are typically required to repay the amount of the First-Time Homebuyer Tax Credit claimed in the year of purchase when their home is sold, you are not required to. This is because an exception was made for homebuyers in 2009 and 2010, for which the recapture of the credit was waived.

Analysis: The prospective deductions include interest expense, real property tax, utilities, insurance, maintenance and depreciation, which may generate tax savings limited to the income from

The real estate division was estimated to have a fair value of $13,890,000. This was determined by totaling the number of lots expected to sell within the next four years and multiplying it by the price per lot of $180,000. After determining total lot sales, a 20% discount rate was applied as suggested by current market conditions. Given the unique nature of the real estate development, it is not believed that there are any comparable developments to find a market multiple.

Hardman v. U.S., Cite as 60 AFTR 2d 87-5651 (827 F.2d 1409), Code Sec(s) 163, (CA9), 09/18/1987. Rudolph A. Hardman, Frances N. Hardman and Hardman, Inc., Plaintiffs-Appellants v. U.S., Defendant-Appellee. Hardman, Inc. bought twenty acres of land abutting Hale Field. In 1977, the corporation resold the property, including the extra twenty acres of land, for $600,000. It paid Mrs. Hardman $109,568 (one third of the net profit attributable to the 100 acres of land of Hale Field). Hardman Inc. characterized the $109,568 as part consideration for the purchase of property from Mrs. Hardman. The Hardman’s treated the payment as a “capital gain” and then Hardman, Inc. added the payment to its basis in the property. The IRS felt that the payment from Hardman Inc. to Mrs. Hardman was considered a “payment” as a dividend to Frances Hardman. The IRS felt that the payment was taxable as “ordinary income” to Mrs. Hardman and improperly added to the corporation's basis on resale. As a result, Rudolph and Frances Hardman and Hardman, Inc. appealed the district court decisions upholding tax deficiencies assessed by the Internal Revenue

There are a magnitude of distinctive concerns that a purchaser would have regarding the property in question. First of all, since the purchaser would want to change what the property is being used for, the one would need to know that they can make the necessary changes to the operation of the land and that

A trade or businesses is considered a passive activity according to the IRC if the taxpayer does not materially participate in that respective trade or business. Any income or loss derived from the passive activity is to be treated as passive income/loss. Additionally the Code automatically classifies income/loss from most rental activities as passive, regardless of whether the taxpayer materially participated or not. Net losses generated from passive activities cannot offset income from portfolio or active income. If a taxpayer’s passive activities result in net income, then the income must be reported, but if they result in a net loss then the loss must be suspended until they generate passive income to offset the loss.

Case A – When the asset is sold to Pardeep’s brother for $100,000, he has sold the asset for proceeds more than its fair market value (“FMV”) of $75,000. A capital gain of $50,000 will be realized and there will be taxes to be paid even though ownership of the property has stayed within the family. Mardeep’s tax cost on the asset will be $75,000.

During the sale of the properties, the individuals can exclude up to $250,000 of realized gain before having to pay any tax on the income.

In defined situations, the Crown can grant the right to access mineral reserves on freehold or leasehold land to third parties. This excludes land already subject to a mining tenement or in relation to a special prospecting licence . There are also circumstances where the applicant for a mining tenement must obtain written consent from the private land owner and the private land owner can ‘veto’ the application . These circumstances include land that is:

The IRS addresses the topic of capital assets in Section 1221 (Legal Information Institute). Within this section, rather than defining what qualifies as a capital asset, The Code lists items that are not capital assets. This backwards approach has led to a grey area in regards to what classifies as a capital assets. As a result, many court cases have been on this topic. Once it is determined whether an asset is “capital in nature”, the various tax treatments can be considered. Specifically, capital assets sold at a gain that are held for less than one year at the time of sale will be classified as a short term gain (Investopedia, 2015). Short term capital gains can be used to offset short term capital losses for both individuals and corporations, however any excess short term capital gains will be taxed at the taxpayer’s regular tax rate. In addition, long-term capital gains experienced by a corporation are not subject to the more favorable capital gains rate. Also, when