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COMMERCE 4SB3 FINAL EXAM crib sheet Final V McMaster University
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COMMERCE 4SB3 FINAL EXAM crib sheet Final V McMaster University
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COMMERCE4SB3 FINAL
EXAM crib
sheet Final V
McMaster
University
, Common Classes of Assets for Intangible Property
Chapter 3 Employment Income Comiss Employee Other Employee Class 1(4%), most buildings or other structures including component parts: electrical
Employed Vs self employed – 3 tests wiring, fixtures, plumbing, heating, central air conditioning, acquired after 1987
Economic Reality Test – (1) control (how/where/when to do work (2) ownership of tools (3) Expenses
chance of profit/loss Rent Class 1-MB(10%), new not resale manufacturing buildings used at least 90% for
Integration/organization test – dependence on firm Repairs and Maintenance manufacturing & processing acquired after march 19,2007;each building added to this
Specific Result Test – Self employed status (contract work, length of time spent on specific Supplies (fully deductable) class is put in its own separate class
job @ 1 location) Telephone (long distance charges, Class 1-NRB(6%), non residential buildings acquired on or after mar 19/07;each
Included In taxable Income (Taxable benefits = TB) Fully deductable) building added to class is put in own separate class
-Gross salary , bonus, tips Sect. 5 (1) Class 8(20%), miscellaneous tangible property: furniture (e.g. Chairs, Tables) , fixtures,
-Taxable portion (over $1000) to emrg. Volunteer Utilities
Home Insurance outdoor ads, machinery, equip (photocopiers, refrigeration equip), phones, tools
>=$500
-Value of board & lodge@FMV less actual paid by EE (excp: special/remoteness of work site Property Taxes Class 8 – Taxpayers can elect to create separate class 8 for: computer software, systems
software for electronic process control or monitor equipment and electronic
> 36hours) Mortgage Interest communications control equipment, photocopiers, office equipment that is electronic
-Fringe benefits that create in inequity btw tax payers, personal enjoy, all exp paid trips Chapter 4 – Income from Business communications equipment. E.g. fax machine or telephone – These items need to be
for pleasure = TB Income from a Business For Tax greater than $1,000
-Personal use from freq flyer accum from employer paid biz trips Purposes Class 10(30%), automotive equipment: automobiles (except taxis + rental cars), vans, trucks, trac
-in house financing and tax prep (excep retirement or reemployment = non TB) Starting Point: Subsection 9(1) – profit or accounting net income wagons, trailers, general purpose electronic data processing equip with system preference acquire
-housing loss = (1/2 x Loss Amt - $15000) – requires 40 km min diff in distance Plus: Sec 12-17, income inclusions not included in profit before mar 23, 2004
-moving allowance, unreasonable travel & car allowances (too low/high and not based on Sec 18(1), 19, disallowed expenses & reserves Class 10.1(30%), passenger vehicle with cost in excess of prescribed limit(i.e.=>30000 after yea
KM for employment ( excp: pertaining to sales pers, motor vehicle for other EE’s) 2000), each vehicle put in separate class – NOT SUBJECT TO RECAPTURE or Terminal Loss – Th
Sec 67 – unreasonable amounts
-payments received if employer pays premium to grp disability benefit & non grp premium if Less:20(1)–expenses specifically allowed but not deducted profit are allowed a capital cost allowance equal to ½ the amount of what the CCA would have been.
employer pays Plus: capital losses – book losses on disposal of capital prop. Class 12(100%) tools, instruments, kitchen utensils costing <$500, linen, uniforms, jigs, dies, mou
-Group term life insurance paid by employer, life insurance paid by employer (if EE is Less: Capital gains- book gains on disposal of capital prop rental video cassettes, computer application software, TV commercials
beneficiary) Finishing Point: Income from business for tax purposes Class 13 – SL (100%) Lease hold interest, improvements on leased building, depreciated on strai
- public health care (liab is EE’s) and employer pays it Add Back line basis Depreciate over Length of first lease + 1st renew option OR 5 years (whichever lon
-employer paid costs for spouse vacation with EE -accounting depreciation Class 14 - SL Patent, franchise, concession or license for limited period (no ½ life rule) – straight l
-any fees not benefiting employer -provision for income taxes depreciation over remaining legal life.
-compensation for Non-compete agreement -services to be rendered in the future Class 17(8%), roads, parking lots, sidewalks, airplane runways, storage areas, surfac
- non cash awards/gifts >500 -A/R for services rendered construction Class 29 – SL (50%), straight line on property that is machinery & equip used i
-reserves (bad debt, warranties – provision Acc. less actual, prepaid rent, pymts for manufacturing or processing acquired after mar 18/2007 and before 2016 (that would otherwis
-gas allowances, standby charges, operating costs
-EE loans interest @ prescribed rate less actual interest paid (if positive than taxable) be in class 43 with
container deposits, for possible decline in inventory market value NOT
obsolescence)
-insurance proceeds- depreciable property
-housing loans: same as above except prescribed rates never higher than day one rate during 30% declining balance rate
pymts based on production & use & restrictive covenants Class 43 (30%) – Manufacturing and processing machinery and equipment acquired after 2016
the first 5 years. Loan Int x Q days / 365 (where Q1=90 days, Q2= 91 days, Q3= 92 Class 44(25%), patents &rights use patented info acquired after Apr 16/93 for a limited or
days, Q4 = 92 days -bad debt recovered
-partnership income unlimited period
-STOCK options benefit- (shares X(FMV when exercised– option price) 50% income
-inducement pymts & reimbursements (grants, subsidies, forgivable loans, allowances in Class 45(45%), general purpose electronic data processing & ancillary equipment and systems
deduction if option not in the money when granted. form of pymt) (E.g. ALLOWANCE for RETURNS) software acquired after Mar 22/04 and before Mar19/07
- When exercised the market price less the price of the option is added to the income -barter transactions- pymnt in kind (sales revenue=FMV of G/S exchanged) Class 50(55%), general purpose electronic data processing equipment and systems software for
UNLESS a CCPC, then when you exercise nothing happens. If you wait 2 yrs or longer from -legal and accounting fees for capital that would otherwise classify for class 4 acquired after mar 18/07
the date you exercise to sell, you receive a 50% deduction on the income incl. -costs regarding purchase capital (E.g. Includes VALUATION) Class 52(100%), eligible computers and software from class 50 acquired after jan27/09 and befo
-biz condo – FMV less amount -financing fees-legal and accounting expenses regarding issuance of shares, articles Feb 2011 – (NO HALF LIFE RULE)
of
-outside financial counseling paid by employer
incorporation costs regarding bank loan, equip purch) – appraisal costs for bank – only **Class 53 (50%) : alternative to Class 29 & Class 43 ; purchased Jan 1/16 – 2025 Note : Class 4
paid by employee 20% deductible so add back 80% was before Mar 17/07 & After 2025
-Gas allowances ** Has to be per KM to be deemed reasonable -appraisal costs regarding capital (to determine value of anticipated sales of capital Class 6 (10%), erect fence
- meal allowances – (if outside municipality or work overtime of 2 hours or more, $17 assets Class 3(5%), 1/2 life rule not applicable
allowance allowed -legal fees in connection with purchase of shares When choosing between Class 14 and 44 – generally longer the life use, better to use 44, shorte
Employment Deductions -non deductable life insurance (pure insurance) time 14.
-Travelling expenses: meals & entertainment (50%), accommodations, airfair *All disposals are the lower of cost and proceeds*
-Meals and entertainment (including event tickets) – 50% deductible unless it relates to
- Meals, Tickets – 50% deductible staff functions 100% (E.g. “Hockey Tickets is 50% deducted) Business Income is Lesser of : (1) Negative amount and (2) total of all cumulative eligible capita
-Automobile expense: lease cost (lesser of formula), gas and oil, maintenance, insurance, -Over contributions of RPP – aka RPP in excess (Least of: (a) employer plus employee deductions less all recaptured deductions in prior years
license, parking, interest paid (and deemed paid) for car loan (formula), depreciation RPP contributions (b) money purchase limit for 2012 (c) 18% of compensation … Plus: 2/3 x (the negative amount – recaptured deductions above)
(30000XHSTX30% depreciation X employment KM/total KM – subject to half year rule, Less employee and employer contributions = amount to in excess therefore added Non taxed gain/loss = 1/3X(negative amount – recaptured deductions)
Note all auto expenses prorated in terms of employment use back )
-legal fee in reference to collection from previous employer - RRPs for employer and employee set at: (2014) 24,270 (2015) 24,930 (2016)
-RPP contribution by EE – fully deductible 25,370 Half Year Rule Exceptions
- Professional fees (only for profession recognized by statute) (2017) 26,010 (2018) 26,230 Property in Class 12 paragraphs:
Not Taxable or Deductible -dividends received from Cdn corporations (a)a book that is a part of a lending library
-Income taxes are not deductable -interest earned on bank account (b)chinaware, cutlery or other tableware
-CPP & EI provide tax credits -interest & penalties on income tax assessments (c)kitchen utensil costing <200
-interest on bank loans borrowed to purchase fixed asset (e) medical or dental instrument costing <200
-interest on (deficit) IT installments
-amortization of bond premiums/discounts
-Group disability insur. Premiums and private health premiums – if paid by employer than is -Interest on provincial or federal taxes, not allowed. (g) linen
exempt – not taxable/deductable -$ received from CRA (h) tool costing <500
-ont health payroll tax – if liability is the employers, then not taxable/deductable -excess of FIFO over LIFO (i) uniform
-RPP paid by employer is not taxable/deductable -compensation from insurance company (k) rental apparel or costume including accessories, patent, franchise,
- Group income protection premiums -accrual for potential settlement concession or license for limited period (definite time)
- statutory exceptions: employers contributions: -dividends payable (as part of salary expense) Property in classes 14,15,23
(1) RRP, grp sickness/accident insurance plan, private health plan premiums & provincial -life insurance premium (employer as beneficiary) Vice-president, -President ($per Types of Capital Property
health tax levies, supplementary unemployment benefit, grp term life insurance policy month x months not held as collateral) Depreciable Property
(if employer is beneficiary) -software
-SR&ED upgrades
per f/s -property acquired by taxpayer where CCA has been allowed or will be
(2) benefits: under retirement compensation arrangements, employee benefit plan or employee allowed
trust - Fees to incorporate a company – NOT deductible, should be capitalized. -since it also treated as capital property a capital gain may arise (capital
(3) benefits in respect of use of an automobile -capital loss (&expenses to create a loss) loss can never arise on disposition)
(4) benefits from counseling services in respect to mental/physical health -recapture -CCA deduction from net income to reflect the wear and tear is allowed and
and reemployment/retirement Prohibited Deductions is based on declining balance method
(5) benefits under salary deferral arrangement Reserves – potential liabilities that depend on future events happening to establish -prescribes a specific method and specific rates to each prescribed class
(6) education assistance received that is separate from job and employers them as real liabilities contingent things ** - Grants, subsidies and investment tax credits (ITCs) reduce the capital
Recreational facilities & club dues E.g. GOLF cost of a depreciable property
-reimbursements for housing loss, mortgage interest
Political contributions
- employer provided recreational facilities and membership fees
Charitable Donations
-cost of EE’s biz trips
Automobile expenses, 0.54 cents per km for first 5000km than 0.48 cents after Eligible capital property (CECA)
-non cash award <500 Workspace in home, prohibited unless (a) workspace is the individuals principal place -includes intangibles such as goodwill, patents, unlimited life franchises and
-landline phone – NOT deductible. biz (b) used on regular basis incorporation costs
Employee Deduction Provisions Limitation on accrued expenses, (1) if amount remains unpaid after 2 years than must-when eligible capital expenditure (ECE) is incurred, 75% of the cost in
-8(1)(f) sales expense, taxpayer limited to amount of commissions, not limited to type of be put back in on 1st day of 3rd taxation year (2) unpaid remuneration : must be paid included in a single common pool referred to as CEC and is subject to a rate
expenditures within 179 days of the end of of tax depreciation of 7%
-8(1)(h) travel expenses + 8(1)(h.1) motor vehicle travel expenses: no employment Taxation year in which expense occurred, if not paid than will not be deductable until it -cumulative eligible capital amount (CECA) deduction from net income is
is actually paid
restrictions, not limited to an amount, limited to general or motor vehicle travelling expenses allowed
-8(1)(i) dues and other expenses – includes office rent or salary to assistant. Must Deductions Specifically Permitted -legal fees for the set-up of a corporation are included in ECE CCA
PRORATE if % of home used
Interest, interest paid on funds borrowed to earn income as deductible (e.g. Bond -If balance of CEC is negative, take into business income:
Int.
-8(1)(J): motor vehicle + aircraft costs as follows: (1) interest on funds borrowed x business Paid deduct IF they produce income for business) Lesser of: (1) Negative balance, (2) all cumulative eligible capital amounts
use (max $300/month) (2) capital cost allowance; max deduction =(30000 X HST X
30% Systems for reserves under the act, deducted include: (1) reserves for doubtful claimed in previous years less deductions previously recaptured in prior
debts
X1/2 (year 1 only)… (aircraft is 40%) or inventory obsolescence (2) reserves for goods not delivered or services not rendered year business income inclusions
(3) manufac warranty reserve … note any reserve taken under one of these
PLUS
provisions 2/3 x (the negative CEC balance LESS the above)
-8 (m) limit of 18% of employee’s earnings for all employee/employer contributions (RRSPs, must be brought back next year into income
RRBPs, DPSPs) Write offs of capital expenditures, sec 20 allows deduction of deprec capital prop and CCA Procedure (Table)
-capital cost = least of (1)fair market value (2)undepreciated capital cost of the seller (3) cost of eligible capital property CCA & CECA Opening undepreciated capital cost – UCC @ beg. Year
dollar max found in law 30000 (plus tax) Expenses of issuing shares or borrowing money, 1/5 deductible: printing, ad costs, Add: purchases
-leased passenger vehicle lesser of: (1) [AXB/30] – C – D – E (2) [FXG/.85H] – D – E filing fees, legal and accounting fees …. Deductions must be amortized over 5 years Less: sold (lesser of cost or proceeds)
(used when EE leases on car) -legal fees connected with purchase of shares or capital are fully taxable = undepreciated capital cost before adjustment
-A: dollar monthly max =800 plus tax (HST, GST) Premiums on life insurance used as collateral, deductable only on time it is used Less: ½ of net purchase additions (Additions - Disposals) ***
-B: aggregate of the number of days the vehicle was leased for for collateral, must add back period that isn’t used for collateral = undepreciated capital cost before CCA
-C aggregate of the lease costs deducted in all preceding years Discount on debt obligations, 50% deduction allowed at earlier of redemption or Multiply by: CCA rate
-D imputed interest at the prescribed rate on refundable amounts (i.e deposits) over maturity Deduct CCA in class for the year (max) CCA @ _% for Class _
$1000 ** EXPENSES to EARN INCOME ** (e.g. seminars, training) Add: recapture
Employee contributions to registered pension plan Deduct Terminal Loss
-E total reimbursements receivable in respect of the lease in the year
Employers contribution under a deferred profit sharing plan Add ½ of net purchase additions from above
-F total lease changes payable for the year AMT x # of Months
-G dollar max capital cost (30000)
-H greater of (a) dollar max prescribed amount (30000XHSTX100/85) (b) manufacturers list Cancellation of lease =closing UCC
price -*** Standby charge **** = A/BX[2% X (CXD) + 2/3(E-F)] where -A lesser of (a) total personal use km driven during available time period (b) value determined for B dur
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