Reference no: EM132821773

Question

1) The following information relates to the ABC's depreciable assets.

- During 2020, a new office building was acquired at a total cost of $623,000. Of this total, it is estimated that the value of the land is $145,000. The building will be used 100 percent for non-residential activities, none of which involve manufacturing. It will be allocated to a separate Class 1.

- The January 1, 2020 balance in this Class was $798,000. During 2020, one of the warehouses in this Class burned to the ground. It had a capital cost of $150,000. Insurance proceeds totaled $185,000.

The January 1, 2020 balance in this Class was $346,000. During 2020, the Company acquired Class 8 assets at a cost of $105,000. Class 8 assets with a capital cost of $83,000 were sold for proceeds of $75,000. None of the individual assets sold had proceeds that exceeded their individual capital cost.

- The January 1, 2020 balance in this Class was $150,000. During 2020, 3 passenger vehicles were acquired at a cost of $25,000 each. In addition, a delivery van with a capital cost of $42,000 was sold for $18,000.

The January 1, 2020 balance in this Class was $17,850. The only asset in this Class was the CEO's $350,000 Bentley. At the instructions of the Company's directors, who felt this vehicle was excessively extravagant, the car was sold for $275,000 during 2020.

Class 13 - The January 1, 2020 balance in this Class was $42,500, reflecting improvements that were made in 2018, the year in which the lease commenced. These improvements were made on a property leased as office space for the Company's executives. The basic lease term is for 8 years, with an option to renew for a period of 2 years. Additional improvements, costing $40,000, were made during 2020.

Class 50 - The January 1, 2020 balance in this Class was $23,000. During 2020, there were additions to this Class with a capital cost of $18,000.

Class 53 - The January 1, 2020 balance in this Class was $63,000. The capital cost of the assets in this Class was $84,000. As the Company has found its manufacturing operations to be unprofitable, all of these assets were sold during 2020. The proceeds totaled $51,000. None of the individual assets sold had proceeds that exceeded their individual capital cost.

ABC always takes maximum CCA on each Class of depreciable assets.

Required: Calculate the maximum CCA that can be taken by ABC on each class of assets for the year ending December 31, 2020 and calculate the UCC for each class of assets on January 1, 2021. In addition, determine the amount of any capital gain, recapture, or terminal loss that arises. Ignore GST/HST/PST considerations.

Question 2

Irene received the following dividends in 2020:

· an eligible dividend of $4,000

· a non-eligible dividend of $1,500

· a dividend of $850 from a foreign corporation, net of $150 of foreign tax withheld

· a stock dividend of 100 shares; the paid-up capital of the corporation was increased by $10 for each share issued, and the issuing company is a public company

Required:

Indicate the amount to be included in net income for tax purposes in respect of each of the dividends received by Irene in 2020.

Question 3

Irene owns two residential rental properties and purchased a third in 2020.

Details related to the properties are as follows:

Total rent received ($4,000 is a deposit in respect of next year) 24,000

Total expenses to earn rental income, excluding CCA 16,000

Building #1 opening UCC 72,000

Building #2 opening UCC 180,000

Proceeds of disposition on building #1 on April 30, 2020 120,000

Original cost of building #1 80,000

Cost of new rental building purchased on May 1, 2020 (land excluded) 250,000

Required:

Compute the minimum rental income for Irene in 2020 in respect of her rental operations.

Question 4

Irene invested $100,000 in a three-year guaranteed investment certificate (GIC) on September 1, Year 1. The GIC pays interest of 1% in Years 1 to 3. The interest compounds and is reinvested each year on the anniversary date of the GIC. The full amount -principal and all compounded interest -will be received upon maturity on August 31, Year 4.

Required:

Determine the minimum amount of income that Irene must report for Year 1 through Year 4 in respect of this investment.