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Quiz: Capital gains and losses

8 questions

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1 A caller asks what proportion of a capital gain is included in income. What is the right handling? Quote the inclusion rate you remember Explain that the whole gain is included Take the inclusion rate from current legislation for the relevant year, since it is set in legislation and has been changed Explain that capital gains are not included in income at all

Answer key unconfirmed — rests on 1 unverified claim.

2 A taxpayer gave shares to his adult daughter for nothing. He says there were no proceeds, so no gain. Incorrect — a gift is a disposition, and on a non-arm's-length transfer for less than fair market value the proceeds are deemed to be fair market value Correct, provided the recipient is a family member Correct — with no proceeds there is no disposition Incorrect — a gift is a disposition, but proceeds are deemed to be the adjusted cost base

Answer key unconfirmed — rests on 2 unverified claims.

3 A taxpayer sold shares at a loss and bought the identical shares back a week later inside her TFSA. What happens to the loss? It is denied by the superficial loss rule, and because the repurchase was inside a registered plan the loss is permanently denied rather than added to the adjusted cost base It is denied and added to the adjusted cost base of the repurchased shares It is allowed, since the repurchase was in a different account It is allowed but deferred until the shares are sold from the TFSA

Answer key unconfirmed — rests on 2 unverified claims.

4 A taxpayer has a large allowable capital loss and substantial employment income. Can the loss shelter the salary? Yes, up to an annual limit Yes, but only in the year the loss arose Yes, in full No — an allowable capital loss may only be applied against taxable capital gains

Answer key unconfirmed — rests on 2 unverified claims.

5 A taxpayer sold his home at a gain that is fully covered by the principal residence exemption. Does he report it? Yes — the disposition must be reported even where the gain is fully exempt, and reporting is required to make the designation No — a fully exempt gain need not be reported Only where the sale proceeds exceed a threshold Only where the property was rented for part of the ownership period

Answer key unconfirmed — rests on 3 unverified claims.

6 A taxpayer received a T5008 and wants to use the figure on it to report her gain. The slip gives everything needed for the calculation The slip reports the adjusted cost base but not the proceeds The slip reports the gain directly The slip reports proceeds of disposition but generally not the adjusted cost base, which she must determine herself

Answer key unconfirmed — rests on 4 unverified claims.

7 Which of these are deemed dispositions at fair market value? Select all that apply.

Select all that apply.

Transferring property between one's own accounts at the same institution Death of the individual, immediately before death A change in use between personal use and income-producing use Ceasing Canadian residency, for certain property

Answer key unconfirmed — rests on 3 unverified claims.

8 A taxpayer buys and flips condominiums, intending resale at a profit each time. How is the profit treated? As capital gains, but with the principal residence exemption denied As capital gains, since real property is capital property Potentially as business income, fully included, rather than as a capital gain As capital gains, with the inclusion rate doubled

Answer key unconfirmed — rests on 3 unverified claims.

Unanswered questions are marked wrong. There is no partial credit.