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Tax Dpa Chapter 6

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Submitted By jastj2
Words 2580
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4SB3 – Chapter 6
Income From Property

INCLUSIONS
Specific Inclusions of Property Income * Section 12 requires the inclusion of the following returns on investments in the calculation of income form a property * Interest income from savings, deposits, loans, bonds, and debentures * Dividends from shares * Income based on the production or use of property

* The primary method for computing interest on a “debt obligation” is the annual accrual method * The act requires this method to be used for corporations, partnerships, certain trusts and individuals * Not possible to defer the inclusion of interest income * Individuals holding an interest in an investment contract include in income, on every anniversary of that contract any interest accrued to that day

* Discount or premium on debt is interest income or a capital gain? * The amount determined by the terms of the loan agreement and the price at which the property is sold are the factors to consider * If property is sold at FMV, no interest component in the payments will be assumed but an interest inclusion provision will apply to the sale of property if the contractual price in total, exceeds the fair market value of the property * Interest on a scholarship trust fund is not taxable to a parent or grandparent who establishes the fund under the registered education savings plan legislation * No tax is paid until it is paid out for the benefit of the child

Purchasing a Corporate Bond at a Discount * The Investor’s Position * If the payment can be regarded in part as interest and in part as capital, the interest portion should be included in income to the extent the amount is paid or payable * When an interest bearing bond is purchased at a price that reflects the FMV, the CRA accepts the view that section 16(1) would

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