AP 11-2 Allowable Business Investment Losses (ABIL) In 2018, after several years of working part time, Lucinda Mclvor won a lottery prize of more than $1,000,000. She embarked on a program of actively investing in rental properties and in the shares and debt of small private companies. Her investment income during the three years 2019 through 2021 were as follows: 2019 During this year she realized a large capital gain on the sale of shares in a successful small business corporation. The shares were eligible for the capital gains deduction as QSBC shares. She used $156,000 of her capital gains deduction (actual capital gains deduction was $78,000 [(50%) ($156,000))) to reduce her 2019 taxable income to an amount that allowed her to claim all of her available tax credits and reduce her federal tax payable to nil. 2020 During this year she had the following amounts of income: Taxable capital gains Rental income Interest income Total 2021 Income amounts during this year were as follows: Taxable capital gains Rental income Interest income Total $ 17,300 91,450 38,275 $147,025 $ 18,620 86,300 27,438 $132,358 During 2021, Recovery Inc., a small business corporation to which she had extended a loan of $675,000, began bankruptcy proceedings. Lucinda has been advised that it is extremely unlikely that she will recover any of this amount. Given this, Lucinda will file an election under ITA 50(1) to deem the debt to have been disposed of for nil proceeds. The only tax credit available to Lucinda in 2020 or 2021 is the basic personal credit (basic personal amount of $13,229 in 2020 and $13,808 in 2021). For several years prior to 2019, Lucinda's tax pay- able was eliminated by various credits. She did not have any loss carry overs from years prior to 2021. Required: Determine Lucinda's optimum taxable income for the years ending December 31, 2020, and December 31, 2021. In your solution, consider the effect of the basic personal credit. Indicate any loss carry over balance that is available at the end of either year, and the rules appli- cable to claiming the loss carry over.

AP 11-2 Allowable Business Investment Losses (ABIL) In 2018, after several years of working part time, Lucinda Mclvor won a lottery prize of more than $1,000,000. She embarked on a program of actively investing in rental properties and in the shares and debt of small private companies. Her investment income during the three years 2019 through 2021 were as follows: 2019 During this year she realized a large capital gain on the sale of shares in a successful small business corporation. The shares were eligible for the capital gains deduction as QSBC shares. She used $156,000 of her capital gains deduction (actual capital gains deduction was $78,000 [(50%) ($156,000))) to reduce her 2019 taxable income to an amount that allowed her to claim all of her available tax credits and reduce her federal tax payable to nil. 2020 During this year she had the following amounts of income: Taxable capital gains Rental income Interest income Total 2021 Income amounts during this year were as follows: Taxable capital gains Rental income Interest income Total $ 17,300 91,450 38,275 $147,025 $ 18,620 86,300 27,438 $132,358 During 2021, Recovery Inc., a small business corporation to which she had extended a loan of $675,000, began bankruptcy proceedings. Lucinda has been advised that it is extremely unlikely that she will recover any of this amount. Given this, Lucinda will file an election under ITA 50(1) to deem the debt to have been disposed of for nil proceeds. The only tax credit available to Lucinda in 2020 or 2021 is the basic personal credit (basic personal amount of $13,229 in 2020 and $13,808 in 2021). For several years prior to 2019, Lucinda's tax pay- able was eliminated by various credits. She did not have any loss carry overs from years prior to 2021. Required: Determine Lucinda's optimum taxable income for the years ending December 31, 2020, and December 31, 2021. In your solution, consider the effect of the basic personal credit. Indicate any loss carry over balance that is available at the end of either year, and the rules appli- cable to claiming the loss carry over.

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter18: Corporations: Organization And Capital Structure

Section: Chapter Questions

Problem 39P

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