ACCT226 Chapter 8 Exam Exercise #6 PDF

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Exam Exercise Chapter 8 - Change In Use - CCA On Rental PropertyFor a number of years, Ms. Danine Post has owned a rural cottage property that has been used for her personal enjoyment. The cottage cost $142,000 in 2015 and, on July 1, 2019, it has a fair market value of $242,000. She estimates that ...

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Exam Exercise Chapter 8 - Change In Use - CCA On Rental Property For a number of years, Ms. Danine Post has owned a rural cottage property that has been used for her personal enjoyment. The cottage cost $142,000 in 2015 and, on July 1, 2019, it has a fair market value of $242,000. She estimates that the fair market value of the land on which the cottage is located is $22,000 on both of these dates. It will not be designated as her principal residence for any of the years owned. On July 1, 2019, she rents the property to an arm’s length party for an amount of $1,000 per month for a period of three years. Net rental income for the year ending December 31, 2019, before the deduction of any CCA, is $4,800. What is the maximum amount of CCA that she can deduct for 2019?

Exam Exercise Chapter 8 - Change In Use - ACB, UCC And CCA On December 1, 2019, Mr. Jordon Jordu converts his summer cottage into a rental property. The cottage has an original cost of $57,000 and it will not be designated as his principal residence for any of the years owned. At the time of the conversion, the fair market value of the property is $136,400. It is estimated that the land value that is included in both the $57,000 cost and the $136,400 fair market value is $20,000. Determine the 2019 tax consequences of this change in use. Your answer should include the maximum CCA that would be available for 2019, and the January 1, 2020 UCC for the rental property, assuming the maximum 2019 CCA is deducted.

Exam Exercise Chapter 8 - Emigration Mr. Ryan Marchand owns publicly traded securities with an adjusted cost base of $30,000 and a fair market value of $56,000. On August 15, 2019, he permanently departs from Canada still owning the shares. What would be the tax consequences of his departure, if any, with respect to these securities?

Exam Exercise Chapter 8 - Emigration Ms. Renee Black owns publicly traded securities with an adjusted cost base of $45,000 and a fair market value of $52,000. On December 1, 2019, she permanently departs from Canada without selling the shares. What would be the tax consequences of her departure, if any, with respect to these securities?

Exam Exercise Solution Chapter 8 - Change In Use - CCA On Rental Property The required calculations are as follows:

Cost Of Building ($142,000 - $22,000)

$120,000

FMV At Change In Use ($242,000 - $22,000)

$220,000

Cost

( 120,000)

Gain

$100,000

Bump Up

1/2

50,000

Cost For CCA Purposes = UCC

$170,000

One-Half Net Additions [(1/2)($170,000)]

( 85,000)

CCA Base

$ 85,000

Rate

4%

Maximum 2019 CCA

$ 3,400

The short fiscal period rules do not apply to an individual earning property (rental) income. As the maximum CCA is less than the $4,800 in net rental income, the maximum amount of $3,400 can be deducted.

Exam Exercise Solution Chapter 8 - Change In Use - ACB, UCC And CCA There would be a taxable capital gain resulting from the change in use as follows:

Deemed Proceeds Of Disposition ($136,400 - $20,000)$116,400 Adjusted Cost Base ($57,000 - $20,000)

( 37,000)

Capital Gain

$ 79,400

Inclusion Rate

1/2

Taxable Capital Gain

$ 39,700

Cost Of Building ($57,000 - $20,000)

$ 37,000

FMV At Change In Use ($136,400 - $20,000)

$116,400

Cost

( 37,000)

Gain

$79,400

Bump Up

1/2

39,700

Cost For CCA Purposes = UCC

$ 76,700

One-Half Net Additions [(1/2)($76,700)]

( 38,350)

CCA Base

$ 38,350

Rate Maximum 2019 CCA

January 1, 2020 UCC ($76,700 - $1,534)

4% $ 1,534

$ 75,166

The short fiscal period rules do not apply to an individual earning property (rental) income.

Exam Exercise Solution Chapter 8 - Emigration There would be a deemed disposition on his departure, leaving him liable for the taxes on a $13,000 [(1/2) ($56,000 - $30,000)] taxable capital gain.

Exam Exercise Solution Chapter 8 - Emigration There would be a deemed disposition on her departure, leaving her liable for the taxes on a $3,500 [(1/2) ($52,000 - $45,000)] taxable capital gain....