2012 Handout for ADMS 4562 Midterm 1
Midterm 1 information
The midterm is on Sunday, February 5, from 7 to 9 pm and will cover
Lectures 1 to 4. The midterm location is ACW 206
Students who have a conflict should contact Cynthia Shea (and c.c. your
course director) at cshea@yorku.ca at least 2 weeks prior to the midterm to
be put on the list to write an alternate ADMS 4562 midterm.
Past midterms are/will be posted under Exam Information.
This midterm information sheet will be given to you at the midterm. Don’t bring it
with you.
Loss carryforwards
(a) non capital losses under s. 111(1)(a): Loss carryovers
- Non capital losses (-3 years, +20 years for taxation years ending after 2005)
(forward 10 years for taxation years ending after March 22/04 and before Jan 1, 2006) (forward 7 years for taxation years
ending before March 23/04)
(b) net capital losses under s. 111(1)(b): back 3 years, forward indefinitely against net taxable capital gains
= net allowable capital losses for the year
Net capital losses are stated using the fraction (inclusion rate) in effect in the year of the loss and must be converted to the
fraction in effect for the year they are deducted.
The TCG/ACL fraction was
½ from 1972 to 1987
2/3 in 1988 and 1989 (last 2 years of the 80’s)
¾ in the 1990’s
½, 2/3 and ¾ at various times in 2000
½ from 2001 onwards
Small business deduction = 17% of the least of:
1. Canadian active business income
2. Taxable income
Less 10/3 x FNBTC
Less
3.77 x FBTC
3. Business limit ($500,000)
Business limit reduction = If a corporation’s (or associated group’s) taxable capital in Canada in the immediate prior
year is
1.$10M or less, there is no reduction.
2.between $10 million and $15 million, the annual business limit ($500,000) is reduced to zero on a straight-line basis.
3. $15 million or greater, the limit is nil.
Special 35% ITC is available for CCPCs
Only the first $3M of annual SR&ED expenditures by an associated group of CCPCs are eligible
With taxable income between $500,000 and $800,000, the $3M SR&ED expenditure limit is reduced to zero on a straightline basis
With taxable capital between $10 million and $50 million, the $3M SR&ED expenditure limit is reduced to zero on a
straight-line basis
(d) Part of the 35% ITCs are "refundable" under s. 127.1
- there is a 100% refund on ITC's for current expenditures
- there is a 40% refund for ITCs for capital expenditures
M&P deduction = 11.5% of the lesser of (i) M& P profits minus amount eligible for SBD or (ii) Taxable income minus 1.
amount eligible for SBD 2. AII and 3. 3.77 x BFTC
General tax reduction = 11.5% of
Taxable income
Less: 100/11.5 x M&P profit deduction
100/17 x SBD deduction
AII
Additional refundable tax = 6 2/3% of the lesser of
(i) AII
(ii) Taxable income minus amount eligible for SBD
Ref Pt I tax = the least of
(a) 26 2/3% AII - [NBFTC - 9 1/3 % For Inv Inc]
(b) 26 2/3% [TI – SBD amount -25/9 NBFTC – 3.77 BFTC]
(c) Part I tax
Part IV Tax
Connected – ownership % x Div Ref =
Non-connected – 1/3 x dividends received =
Dividend Refund
= lesser of RDTOH closing balance and 1/3 Taxable dividends paid
RDTOH
O/B
- prior year’s dividend refund
+ Ref Pt I tax
+Part IV tax
= Closing Balance
Commonly encountered CCA classes & assets
Class 1 (4%) - brick buildings after 1987 (see chart below)
Class 6 (10%)- fences
Class 8 (20%)- property not included in other classes –e.g. furniture, fax machines
Class 9 (25%) - aircraft
Class 10 (30%)
– automotive equipment other than Class 10.1 assets
- computer equipment and systems software acquired before March 23, 2004 (2004 budget)
(the new class is Class 45, 50 and 52; see chart below)
Class 10.1 (30%)
- passenger vehicles costing in excess of $30,000
Class 12 (100%)
- ½ net amount rule applies to dies, molds, tools & computer applications software
- no ½ net amount rule for utensils costing less than $200 [$500 for tools acquired on or
after May 2, 2006], linens, cutlery, tableware
Class 13 - leasehold interests (leasehold improvements)
- straight line over the greater of
- 5 years
- remaining lease term plus first renewal period (to a max. of 40 periods)
Class 14 (straight line based on legal life in days) - limited life intangibles
- Patents (or rights to use patents) can either go in Class 14 or Class 44
Class 17 (8%) - parking lot
Class 39 (25%) – property used in M&P acquired after 1987 and before Feb 26, 1992 (the
new class is Class 43)
Class 43 (30%) - property used in M&P acquired after Feb. 25, 1992 and before March 19,
2007 (see below)
Class 44 (25%) - patents or rights to use patented information (see Class 14 above for
discussion)
Class 45 (45%) - computer equipment and systems software acquired after March 22, 2004
and before March 19, 2007 (see below)
Class 46 (30%) - data network infrastructure equipment acquired after March 22, 2004
(these assets were formerly in Class 8 because they were not specifically mentioned in
any other class)
The 2007 budget included the following changes for acquisitions after March 18, 2007:
Old CCA class (and
Current CCA
rate)
rate (and class)
New buildings used 90% or more for
Class 1 (4%)
10% (separate
manufacturing or processing in Canada
class 1 for each
building; must
elect)
New buildings used 90% or more for other nonresidential purposes
Class 1 (4%)
6% (separate
class 1 for each
building; must
elect)
100% - class 52
and no ½ net
rule
Computer hardware and systems software
(purchased after March 18, 2007 and before
January 28, 2009 and after Jan. 31, 2011)
Class 45 (45%)
55% (class 50)
[½ net rule
applies]
Machinery and equipment used in manufacturing
or processing (temporary change for acquisitions
before 2014)
Class 43 (30%)
50% straightline (class 29,
must elect)
Computer hardware and systems software
(purchased after January 27, 2009 and before
February, 2011)