Introduction to Federal Income Taxation in Canada 43rd Edition 2022-2023

Edition by Nathalie Johnstone , Devan Mescall , Julie Robson Test bank Sample

(a) Pi can deduct the $1,000 of interest but not the property taxes paid in this year on the basis that the land may generate a capital gain on the land some day.

(b) Pi could deduct all of the above expenditures if he were to rent the land to a farmer for the year for $2,000.

(c) The property is a personal-use property and, thus, none of the above expenditures can ever be deducted, even if the property is rented in the year.

(d) Pi can claim the principal residence exemption on any future sale of the land if he decides to sell the land without building a home.

19) Rho Limited is in the midst of constructing a new building to house its administrative staff. The building began construction on December 4, 2021, and will be completed for occupancy on January 31, 2023. Which of the following expenditures made during 2022 is DEDUCTIBLE to Rho Limited in computing its income from business for its taxation year ended December 31, 2022?

(a) CCA on new office furnishing in storage as of December 2022, pending occupancy of the building.

(b) Cost paid to the security company to patrol and protect the property during 2022.

(c) Interest on the construction loan, related to the cost of the land on which the building is significantly constructed.

(d) The landscaping costs related to the building paid during 2022.

20) Clip Ltd.’s income statement for accounting purposes for its year ended December 31, 2022 shows a profit of $180,000 from the sale of widgets to a valued customer. The gross proceeds were $300,000 and the cost of sales was $120,000. The gross proceeds of $300,000 are payable in four equal instalments of $75,000, due on June 1 each year, commencing June 1, 2022. The deduction necessary to reconcile accounting income to income for tax purposes for 2022 in respect of this transaction is:

(a) Nil

(b) $135,000

(c) $144,000

(d) $45,000

21) On April 30 , 2022, a personal residence owned by James Day, which originally cost $280,000, was converted into a rental property. At this time, the rental property had a fair market value of $340,000. What is the maximum capital cost allowance that could be claimed for 2022 on this rental property (assuming no restrictions)?

(a) $20,400

(b) $13,600

(c) $18,600

(d) $12,400

22) On June 1, 2009, Sabrina purchased a condominium in Brandon, Manitoba, for $130,000. She lived in the condominium until she married in August 2013. At that time, she moved into a rented apartment in Winnipeg, Manitoba, with her new husband. She commenced to rent her condominium in late 2013, at which time it was valued at $145,000. In December 2022 she sold the condominium for $180,000 to generate some cash to pay for a new house. Assuming that Sabrina elected under subsection 45(2) in respect of the condominium in 2013, what is the approximate minimum taxable capital gain that she will realize in 2022 on the sale?

(a) $50,000