Course-Level Assessment Project: Computation of Taxes Payable and Providing Tax Planning Advice to a Client

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1 Course Description This course builds on concepts learned in introductory financial accounting and microeconomics and in the study of the fundamentals of the Canadian Income Tax System with respect to individuals. In this course, students are introduced to the principles and practice of taxation and related tax planning for individuals and provided with a basic understanding of the Canadian Income Tax Act. Topics covered include the identification of sources of income and how they are taxed, the computation of net income, taxable income and taxes payable for individuals resident in Canada, and the impact of taxation on business decision-making for individuals. Student Audience: The predominant audience for this course is undergraduate accounting majors who are in a degree or diploma program. Accounting Majors typically take a sequence of courses beginning with Financial Accounting, followed by Intermediate Financial Accounting, Management Accounting, and then Taxation. Course-Level Assessment Project: Computation of Taxes Payable and Providing Tax Planning Advice to a Client Milestone(s): Milestone 4.1: Computation of Net Employment Income Determine Income Tax Act administration rules for individual taxpayers Compute Division B income for an individual taxpayer resident in Canada, in accordance with Section 3 of the Income Tax Act Determine an individual's Division B income, including income from employment, in accordance with the Income Tax Act Milestone 8.1: Computation of Net Business Income, Net Property Income, and Other Deductions Compute Division B income for an individual taxpayer resident in Canada, in accordance with Section 3 of the Income Tax Act Determine an individual s Division B income, including other income and other deductions, in accordance with the Income Tax Act Compute Capital Cost Allowance (CCA) deductions Determine an individual's Division B income, including income from business, in accordance with the Income Tax Act Page 1 of 36

2 Determine an individual's Division B income, including property, in accordance with the Income Tax Act Milestone 11.1: Computation of Net Income, Taxable Income and Taxes Payable Determine an individual's Division B income, including income from tax deferral plans, RRSP deduction and retirement allowances, in accordance with the Income Tax Act Compute taxable income for an individual taxpayer Compute Division B income for an individual taxpayer resident in Canada, in accordance with Section 3 of the Income Tax Act Compute net Federal taxes payable for an individual taxpayer Determine an individual's Division B income, including taxable capital gains or losses in accordance with the Income Tax Act Explain international taxation issues facing individual taxpayers in Canada Milestone 12.1: Tax Planning Advice, Application of Administrative Rules, and International Taxation Issues Summarize routine tax planning opportunities for individual taxpayers Explain the underlying principles of the income tax system Lesson 1: Tax Administration Outcomes: Determine Income Tax Act administration rules for individual taxpayers Presented: Topic 1: Administrative Rules Describe the administrative rules and processes related to income tax for individuals Identify important dates for individual income tax Compute tax installments Topic 2: Tax Planning, Tax Avoidance and Tax Evasion Page 2 of 36

3 Define the terms, tax planning, tax avoidance, and tax evasion Describe the implications of tax evasion Describe the general anti-avoidance rule as per section 245 of the Income Tax Act Assessed: Assignment 1.1: Tax Theory Describe the administrative rules and processes related to income tax for individuals Identify important dates related to individual income tax Compute tax installments Define the terms tax planning, tax avoidance, and tax evasion Describe the implications of tax evasion Discussion 1.1: Introductions Discussion 1.2: GAAR in Court Describe the general anti-avoidance rule as per section 245 of the Income Tax Act Quiz 1: Quiz 1.1 Describe the administrative rules and processes related to income tax for individuals Identify important dates related to individual income tax Compute tax installments Define the terms tax planning, tax avoidance, and tax evasion Describe the implications of tax evasion Describe the general anti-avoidance rule as per section 245 of the Income Tax Act Supplemental Assignment 1.1: The Theory of Tax Describe the administrative rules and processes related to income tax for individuals Identify important dates related to individual income tax Compute tax installments Define the terms tax planning, tax avoidance, and tax evasion Describe the implications of tax evasion Page 3 of 36

4 Reading: Byrd & Chen's Canadian Tax Principles, Edition Chapter 2, "Procedures and Administration" Assessment Notes: Discussion 1.1: Review general anti-avoidance rule (GAAR) court cases Assignment 1.1: Worksheet: Theory questions related to administrative rules for individuals Supplemental Assignment 1.1: Worksheet: Alternative theory questions related to administrative rules for individuals Notes: Updates: Updates: Occasional - Penalty/Interest Rate/Overall rate they charge (linked documents) CPA competencies: Assesses general tax issues for an individual o General Concepts and Principles of Taxation (b) General anti-avoidance rule (C) Advises taxpayers with respect to assessment, notice of objection, and appeals o General Concepts and Principles of Taxation (c) Filing deadlines and requirements (B) (d) Notice of assessments and appeal process (C) Page 4 of 36

5 Lesson 2: The Canadian Tax System and Structure of the ITA Outcomes: Explain the underlying principles of the income tax system Presented: Topic 1: Tax Systems Describe how each of the fundamentals are incorporated in the income tax system in Canada Describe the underlying objectives of the income tax system Describe the functions of Federal government departments in the income tax system Topic 2: The Income Tax Act (ITA) Describe the structure of the Income Tax Act (ITA) Identify the sections of the Income Tax Act that apply to each source of income Paraphrase sections of the Income Tax Act legislation Describe other information sources beyond the Income Tax Act Assessed: Assignment 2.1: The ITA Describe the structure of the Income Tax Act (ITA) Identify the sections of the Income Tax Act that apply to each source of income Interpret the purpose of sections of the Income Tax Act legislation Describe other information sources beyond the Income Tax Act Discussion 2.1: Tax Policy Describe how each of the fundamentals are incorporated in the income tax system in Canada Describe the underlying objectives of the income tax system Page 5 of 36

6 Describe the functions of Federal government departments in the income tax system Quiz 2: Quiz 2.1 Describe how each of the fundamentals are incorporated in the income tax system in Canada Describe the underlying objectives of the income tax system Describe the functions of Federal government departments in the income tax system Describe the structure of the Income Tax Act (ITA) Identify the sections of the Income Tax Act that apply to each source of income Interpret the purpose of sections of the Income Tax Act legislation Describe other information sources beyond the Income Tax Act Supplemental Assignment 2.1: The ITA Describe the structure of the Income Tax Act (ITA) Identify the sections of the Income Tax Act that apply to each source of income Interpret the purpose of sections of the Income Tax Act legislation Describe other information sources beyond the Income Tax Act Reading: Byrd & Chen's Canadian Tax Principles, Edition Chapter 1, "Introduction to Federal Taxation in Canada" Assessment Notes: Readings: Chapter 1, Sections 1-1 to 1-76 Discussion 2.1: Tax policy what are the underlying objectives of the income tax system in Canada? Are some policies emphasized more than others? How does the debate over progressive vs. flat tax rates fit in with Canada's overall objectives for the income tax system in Canada? Assignment 2.1: Page 6 of 36

7 Worksheet: Theory questions, including questions related to interpreting certain terminology in the ITA and describing the basic structure of the ITA Assignment 2.2: Compare the role and functions of the Department of Finance, the Department of Justice and Canada Revenue Agency Supplemental Assignment 2.1: Worksheet: Alternative theory questions, including questions related to interpreting certain terminology in the ITA and describing the basic structure of the ITA Possible Activity: Mark the ITA (Can students annotate a PDF document without special software?) Notes: This lesson will be identical to Lesson 3 in Tax 2 Updates: None CPA competencies: Assesses general tax issues for an individual o General Concepts and Principles of Taxation (a) Structure and interpretation of ITA (C) Page 7 of 36

8 Lesson 3: Residency and Section 3 Calculation of Net Income Outcomes: Compute Division B income for an individual taxpayer resident in Canada, in accordance with Section 3 of the Income Tax Act Presented: Topic 1: Liability for Income Tax Paraphrase the Charging Provision Topic 2: Canadian Residency Requirements Compare the definition of resident and nonresident Apply the definition of deemed resident and ordinarily resident Topic 3: Section 3 of the ITA Apply the format of section 3 of the Income Tax Act to the calculation of net income for an individual taxpayer resident Assessed: Assignment 3.1: Calculating Net Income Apply the format of section 3 of the Income Tax Act to the calculation of net income for an individual taxpayer resident Contrast the definition of resident versus non-resident Apply the definition of deemed resident definitions and ordinarily resident Discussion 3.1: Determining Residency Interpret the Charging Provision Quiz 3: Quiz 3.1 Interpret the Charging Provision Page 8 of 36

9 Contrast the definition of resident versus non-resident Apply the definition of deemed resident definitions and ordinarily resident Apply the format of section 3 of the Income Tax Act to the calculation of net income for an individual taxpayer resident Supplemental Assignment 3.1: Finding Net Income Apply the format of section 3 of the Income Tax Act to the calculation of net income for an individual taxpayer resident Contrast the definition of resident versus non-resident Apply the definition of deemed resident definitions and ordinarily resident Reading: Byrd & Chen's Canadian Tax Principles, Edition Chapter 1, "Introduction to Federal Taxation in Canada" (pp ) Chapter 20,"International Issues in Taxation" (pp ) Assessment Notes: Readings: Chapter 1: Page 18 to 20 (Topic 1) Chapter 1: Page 21 to 26 (Topic 3) Chapter 20: Page 993 to 1000 (Topic 2) Discussion Topic 3.1: Introduction to US-Canada Tax Convention and "tie breaker" rules for determining residency Assignment 3.1: Several independent case studies calculating net income according to S.3 of the ITA Assignment 3.2: Several independent resident case studies Supplemental Assignment 3.1: Several independent case studies calculating net income according to S.3 of the ITA Notes: Updates: None CPA Competencies: Page 9 of 36

10 6.2.1 Assesses general tax issues for an individual o Concept of residency, deemed resident, part-year resident (not required for entrance) Analyzes tax consequences for non-residents o Existence of tax conventions and treaties (C) Determines income taxes payable for an individual in routine situations o Tax Payable for an individual (B) Page 10 of 36

11 Lesson 4: Employment Outcomes: Determine an individual's Division B income, including income from employment, in accordance with the Income Tax Act Presented: Topic 1: Employment Income Theory Determine if an individual taxpayer is employed or self-employed Topic 2: Calculation of Net Employment Income for an Individual Compute Net Employment Income for an individual taxpayer Topic 3: Tax Planning Issues Identify tax planning issues for employment income Assessed: Assignment 4.1: Calculation of Net Employment Income for an Individual Apply the provisions of Sections 5 to 8 to calculate Net Employment Income for an individual taxpayer resident Identify tax planning issues for employment income Discussion 4.1: Employed Vs. Unemployed Determine if an individual taxpayer is employed or self-employed Quiz 4: Quiz 4.1 Determine if an individual taxpayer is employed or self-employed Apply the provisions of Sections 5 to 8 to calculate Net Employment Income for an individual taxpayer resident Identify tax planning issues for employment income Page 11 of 36

12 Supplemental Assignment 4.1: Individual Net Employment Income Apply the provisions of Sections 5 to 8 to calculate Net Employment Income for an individual taxpayer resident Identify tax planning issues for employment income Reading: Byrd & Chen's Canadian Tax Principles, Edition Chapter 3, "Income or Loss from an Office or Employment" Course-Level Assessment Milestone 4.1: Computation of Net Employment Income Explain the underlying principles of the income tax system Compute Division B income for an individual taxpayer resident in accordance with Section 3 of the Income Tax Act Determine an individual's Division B income, including income from employment, in accordance with the Income Tax Act Determine an individual s Division B income, including income, other income and other deductions, in accordance with the Income Tax Act Assessment Notes: Notes: Updates: Annual i) Auto deduction limits and ii) CPP and EI maximum amounts for the year (linked documents) CPA Competencies: Determines income taxes payable for an individual in routine situations o Sources and Computation of Taxable Income Sources and types of income Office or employment: taxable benefits, deductions allowed and limitations (B) Employee or self-employed, personal services business (C) Page 12 of 36

13 Lesson 5: Capital Cost Allowance Outcomes: Compute Capital Cost Allowance (CCA) deductions Presented: Topic 1: Capital Cost Allowance Theory Describe the fundamentals of the Capital Cost Allowance (CCA) system Topic 2: Computation of CCA Deductions and UCC Balances Compute the Capital Cost Allowance deduction for the current taxation year Compute the Undepreciated Capital Cost balance(s) at the end of the taxation year Topic 3: Cumulative Eligible Capital (CEC) Theory Describe the fundamentals of the Cumulative Eligible Capital (CEC) system Topic 4: Computation of CEC Amounts and Balances Compute the Cumulative Eligible Capital deduction for the current year Compute the Cumlative Eligible Capital balance at the end of the taxation year Assessed: Assignment 5.1: Calculating CCA and CEC Compute the Capital Cost Allowance deduction for the current taxation year Compute the Cumulative Eligible Capital deduction for the current year Compute the Cumulative Eligible Capital at the end of the taxation year Compute the Undepreciated Captial Cost at the end of the taxation year Discussion 5.1: Using Tax Policy to Stimulate Certain Industries or Economy Describe the fundamentals of the Capital Cost Allowance (CCA) system in Canada Page 13 of 36

14 Quiz 5: Quiz 5.1 Compute the Capital Cost Allowance deduction for the current taxation year Compute the Cumulative Eligible Capital deduction for the current year Compute the Cumulative Eligible Capital at the end of the taxation year Describe the fundamentals of the Capital Cost Allowance (CCA) system in Canada Describe the fundamentals of the Cumulative Eligible Capital (CEC) system Supplemental Assignment 5.1: Finding CCA and CEC Compute the Capital Cost Allowance deduction for the current taxation year Compute the Cumulative Eligible Capital deduction for the current year Compute the Cumulative Eligible Capital at the end of the taxation year Compute the Undepreciated Captial Cost at the end of the taxation year Reading: Byrd & Chen's Canadian Tax Principles, Edition Chapter 5, "Capital Cost Allowances and Cumulative Eligible Capital" Assessment Notes: Discussion 5.1: Use of tax policy to stimulate certain industries or economy (Class 29 vs 43, Class 45 vs. 50 vs. 52) Assignment 5.1: Case study with multiple calculations of CCA and CEC Supplemental Assignment 5.1: Alternate case study with different fact pattern and numbers Notes: This lesson will be identical to Lesson 5 in Tax 2 Updates: Occasional Changes Additional Notes: CEC may be going away in Double-check before course release. CPA Competencies: Page 14 of 36

15 6.2.1 Assess general tax issues for an individual Determines income taxes payable for an individual in routine situations o Capital Cost Allowance (CCA): general principles and definitions (undepreciated capital cost, recaptured capital cost allowance, terminal loss, acquisitions and disposition of depreciable property, capital cost allowances classes) (B) o Capital Cost Allowance (CCA): special rules (change in use, non-arm's length, luxury passenger vehicle, deemed capital cost inducement, available for use, short taxation year, loss on certain transfers, consideration FMV rules) (C) o Cumulative Eligible Capital (CEC): general rules, calculation of CEC, acquisition and disposition of eligible capital property (B) Page 15 of 36

16 Lesson 6: Business Income Outcomes: Determine an individual's Division B income, including income from business, in accordance with the Income Tax Act Presented: Topic 1: Business Income Theory Distinguish business income from employment income or a hobby Topic 2: Calculation of Net Business Income for an Individual Compute net business income for an individual Topic 3: Tax Planning Compare the benefits and challenges of each of the legal structures for an unincorporated business Assessed: Assignment 6.1: Calculating Net Business Income Compute net business income for an individual Compare the benefits and challenges of each of the legal structures for an unincorporated business Discussion 6.1: Hobby or Adventure? Distinguish business income from employment incomeor a hobby Quiz 6: Quiz 6.1 Distinguish business income from employment income, property income, capital gains/losses or a hobby Compute net business income for an individual Page 16 of 36

17 Compare the benefits and challenges of each of the legal structures for an unincorporated business Supplemental Assignment 6.1: Finding Net Business Income Compare the benefits and challenges of each of the legal structures for an unincorporated business Compute net business income for an individual Reading: Byrd & Chen's Canadian Tax Principles, Edition Chapter 6, "Income or Loss from a Business" Assessment Notes: Discussion 6.1: Distinguishing between a hobby vs. adventure or concern in the nature of trade (business) Assignment 6.1: Case Study with comprehensive calculation of net business income Supplemental Assignment 6.1: Case Study with comprehensive calculation of net business income Notes: This lesson will be identical to Lesson 6 in Tax 2 Updates: Annual updates required for deductible automobile allowance rates (linked document) CPA Competencies: Assess general tax issues for an individual Determines income taxes payable for an individual in routine situations o Business or Property Income: types of income (active business income, property income, interest income, dividend income, rental properties, capital gain/loss), basic rules and principles, inclusions, deductions limitations) (B) o Capital Cost Allowance: special rules (expenses of representation) (C) Page 17 of 36

18 Lesson 7: Property Outcomes: Determine an individual's Division B income, including income from property, in accordance with the Income Tax Act Explain international taxation issues for individual taxpayers in Canada Presented: Topic 1: Property Income Theory Distinguish between property income and business income Describe how integration affects the taxation of dividend income for individuals in Canada Topic 2: Calculation of Net Property Income for an Individual Compute net property income for an individual Topic 3: Tax Implications of Foreign Source Income Describe the tax consequences for a resident with earnings from a foreign source income Topic 4: Tax Planning Identify tax planning opportunities for property income Assessed: Assignment 7.1: Calculating Net Property Income for an Individual Compute net property income for an individual Describe how integration affects the taxation of dividend income for individuals in Canada Describe the tax consequences for a resident with earnings from a foreign source income Identify tax planning opportunities for property income Page 18 of 36

19 Discussion 7.1: Active vs. Passive Income Distinguish between property income and business income Supplemental Discussion 7.2: Deductibility of Interest Expense Identify tax planning opportunities for property income Quiz 7: Quiz 7.1 Compute net property income for an individual Describe how integration affects the taxation of dividend income for individuals in Canada Describe the tax consequences for a resident with earnings from a foreign source income Distinguish between property income and business income Explain the principles of tax planning for foreign source income Identify tax planning opportunities for property income Supplemental Assignment 7.1: Computing Net Property Income for an Individual Compute net property income for an individual Describe how integration affects the taxation of dividend income for individuals in Canada Describe the tax consequences for a resident with earnings from a foreign source income Identify tax planning opportunities for property income Reading: Byrd & Chen's Canadian Tax Principles, Edition Chapter 7, "Income from Property" Assessment Notes: Readings: Chapter 7 (excluding the section on Income Trusts and Shareholder Benefits) Discussion 7.1: Interest expense what were the reasons given for the court decisions in the Singleton (Singleton v. Canada, (2001), 2 S.C.R. 1046, 2011 SCC Page 19 of 36

20 61) and Ludco (Ludco Enterprises Ltd. v. Canada, (2001) 2 S.C.R. 1082, 2001 SCC 62) cases? What are the key factors drawn from these two court cases that apply to the deductibility of interest expense? Assignment 7.1: A comprehensive calculation of net property income for an individual Supplemental Assignment 7.1: Computation of net rental income for an individual who owns several rental properties; identify tax planning issues for individuals earning net rental income. Notes: Updates: Occasional updates for dividend gross-up and tax credit amounts (linked document) CPA competencies: Assesses general tax issues for an individual o General Concepts and Principles of Taxation (j) Integration under ITA (C) o Sources and Computation of Taxable Income (a) Sources and types of income: Business or property income basic rules and principles, inclusions, deductions - limitations (B) Page 20 of 36

21 Lesson 8: Other Income & Other Deductions Outcomes: Determine an individual s Division B income, including other income and other deductions, in accordance with the Income Tax Act Presented: Topic 1: Other Income and Other Deductions Theory Distinguish the tax treatment for spousal support versus child support Describe a retiring allowance Topic 2: Calculation of Other Income and Other Deductions for an Individual Compute other income for an individual Compute other deductions for an individual Topic 3: Tax Planning Identify tax planning opportunities for other deductions Identify tax planning opportunities for income splitting Assessed: Assignment 8.1: Calculating Other Income and Other Deductions Compute other deductions for an individual Compute other income for an individual Describe a retiring allowance Distinguish the tax treatment for spousal support vs. child support Identify tax planning issues related to other deductions for individuals in Canada Discussion 8.1: Income Splitting Identify tax planning opportunities for income splitting Page 21 of 36

22 Quiz 8: Quiz 8.1 Compute other deductions for an individual Compute other income for an individual Describe a retiring allowance Distinguish the tax treatment for spousal support vs. child support Identify tax planning issues related to other deductions for individuals in Canada Identify tax planning opportunities for income splitting of other income Supplemental Assignment 8.1: Computing Other Income and Other Deductions Compute other deductions for an individual Compute other income for an individual Describe a retiring allowance Distinguish the tax treatment for spousal support vs. child support Identify tax planning issues related to other deductions for individuals in Canada Reading: Byrd & Chen's Canadian Tax Principles, Edition Chapter 9, "Other Income, Other Deductions, and Other Issues" Course-Level Assessment Milestone 8.1: Computation of Net Business Income, Net Property Income, and Other Deductions Explain the underlying principles of the income tax system Compute Division B income for an individual taxpayer resident in accordance with Section 3 of the Income Tax Act Compute Capital Cost Allowance (CCA) deductions Determine an individual's Division B income, including income from business, in accordance with the Income Tax Act Determine an individual's Division B income, including property, in accordance with the Income Tax Act Assessment Notes: Page 22 of 36

23 Readings: Chapter 9, excluding Death of a Taxpayer and topics included in other modules: Registered Savings Plans (Module 9), Non-Arm's Transfers of Depreciable Property (Module 5), Other Non-Arm's Length Transfers (Module 12) and Income Attribution (Module 12). Discussion 8.1: Implications on retirement, including income splitting and tax planning issues. Assignment 8.1: a comprehensive question that requires the calculation of net income for an individual, with sources of other income and other deductions. Supplemental Assignment 8.1: similar to the above assignment, with different sources of other income and other deductions, different amounts and different tax planning issues. Notes: Updates: None CPA competencies: Determines income taxes payable for an individual in routine situations o Sources and Computation of Taxable Income Other sources of income inclusions and deductions Maintenance (B) Retiring allowance and termination payments (B) Support payments (B) Annuity payments (B) Moving expenses (B) Child care expenses (B) Disability support deduction (B) Page 23 of 36

24 Lesson 9: Retirement, RRSP, Tax Deferral Plans, and Estate Planning Outcomes: Determine an individual's Division B income, including income from tax deferral plans, RRSP deduction and retirement allowances, in accordance with the Income Tax Act Presented: Topic 1: Retirement Plans Theory Describe the underlying principles of Registered Retirement Savings Plans (RRSP) along with other tax deferral plans Topic 2: Calculation of the RRSP Deduction Compute the Registered Retirement Savings Plans deduction for an individual Topic 3: Other Retirement Planning for an Individual Distinguish between various tax deferral plans Topic 4: Tax Planning Identify tax planning opportunities for various tax deferral plans Identify the tax planning opportunities for a retiring allowance Assessed: Assignment 9.1: Registered Retirement Savings Plan Deductions Compute the Registered Retirement Savings Plans deduction for an individual Describe the underlying principles of Registered Retirement Savings Plans (RRSP) along with other tax deferral plans Distinguish between various tax deferral plans Identify the tax planning opportunities related to a retiring allowance Discussion 9.1: Deciding to Contribute to a RRSP Plan or a TFSA Page 24 of 36

25 Identify tax planning opportunities for various tax deferral plans Quiz 9: Quiz 9.1 Compute the Registered Retirement Savings Plans deduction for an individual Describe the underlying principles of Registered Retirement Savings Plans (RRSP) along with other retirement plans Distinguish between various tax deferral plans Identify tax planning opportunities for various tax deferral plans Identify the tax planning opportunities related to a retiring allowance Supplemental Assignment 9.1: Calculating RRSP Deductions Compute the Registered Retirement Savings Plans deduction for an individual Describe the underlying principles of Registered Retirement Savings Plans (RRSP) along with other retirement plans Distinguish between various tax deferral plans Identify the tax planning opportunities related to a retiring allowance Reading: Byrd & Chen's Canadian Tax Principles, Edition Chapter 9,"Other Income, Other Deductions, and Other Issues" Assessment Notes: Readings: Chapter 9 (section on Registered Savings Plans) and Chapter 10, excluding Deferred Profit Sharing Plans, Retirement Compensation Agreements and Salary Deferral Plans Discussion 9.1: What are important tax planning issues to consider in determining if a taxpayer should make contributions to a RRSP plan or a TFSA? What are the effects of these issues on tax planning decisions for an individual? Assignment 9.1: a comprehensive question that requires the calculation of net income for an individual, including a comprehensive calculation of the RRSP deduction. Supplemental Assignment 9.1: calculation of RRSP deductions and the application of the anti-avoidance provisions for spousal RRSPs Page 25 of 36

26 Notes: Updates: Annual update to the RRSP annual limit; annual check of the TFSA annual contribution limit CPA competencies: Determine income taxes payable for an individual in routine situations o Sources and Computation of Taxable Income Other sources of income inclusions and deductions Annuity payments (B) Transfer of retirement income and sheltered amounts (B) Advises on specific tax-planning opportunities for individuals Analyzes estate-planning opportunities for individuals o Deferred Income Plans RRSP (C) TFSA (C) RESP (C) RDSP (C) Page 26 of 36

27 Lesson 10: Capital Gains and Capital Losses Outcomes: Determine an individual's Division B income, including taxable capital gains and allowable capital losses, in accordance with the Income Tax Act Presented: Topic 1: Capital Gains and Losses Theory Identify the criteria to distinguish between capital gains and business income Distinguish between an Allowable Business Investment Loss (ABIL) and an allowable capital loss Topic 2: Computation of Taxable Capital Gains and Allowable Capital Losses Define the basic calculation of taxable capital gains and allowable capital losses Compute taxable capital gains and allowable capital losses for an individual Apply the provisions of subsection 13(21.1) for dispositions of real property Describe the replacement property provisions of subsection 13(4) and 44(1) Topic 3: Tax Planning Identify tax planning opportunities for taxable capital gains and allowable capital losses Assessed: Assignment 10.1: Calculating Taxable Capital Gains and Allowable Capital Losses Apply the provisions of subsection 13(21.1) for dispositions of real property Compute taxable capital gains and allowable capital losses for an individual Define the basic calculation of taxable capital gains and allowable capital losses Describe the replacement property provisions of subsection 13(4) and 44(1) Distinguish between an Allowable Business Investment Loss (ABIL) and an allowable capital loss Identify tax planning opportunities for taxable capital gains and allowable capital losses Page 27 of 36

28 Discussion 10.1: Capital Gain or Business Income? Identify the criteria to distinguish between capital gains and business income Quiz 10: Quiz 10.1 Apply the provisions of subsection 13(21.1) for dispositions of real property Compute taxable capital gains and allowable capital losses for an individual Define the basic calculation of taxable capital gains and allowable capital losses Describe the replacement property provisions of subsection 13(4) and 44(1) Distinguish between an Allowable Business Investment Loss (ABIL) and an allowable capital loss Identify tax planning opportunities for taxable capital gains and allowable capital losses Identify the criteria to distinguish between capital gains and business income Supplemental Assignment 10.1: Finding Taxable Capital Gains and Allowable Capital Losses Apply the provisions of subsection 13(21.1) for dispositions of real property Compute taxable capital gains and allowable capital losses for an individual Define the basic calculation of taxable capital gains and allowable capital losses Describe the replacement property provisions of subsection 13(4) and 44(1) Distinguish between an Allowable Business Investment Loss (ABIL) and an allowable capital loss Identify tax planning opportunities for taxable capital gains and allowable capital losses Reading: Byrd & Chen's Canadian Tax Principles, Edition Chapter 8, "Capital Gains and Capital Losses" Chapter 9,"Other Income, Other Deductions, and Other Issues" Assessment Notes: Readings: Chapter 8, except sections: Gains and Losses on Foreign Currency Page 28 of 36

29 Deemed Disposition (Change in Use and Departure from Canada) Deferral Provision on Replacement Property Chapter 9, only section, "Non-Arm's Length Transfers of Property" Discussion 10.1: Tests that the courts have used to determine if income is a capital gain or business income, reference to court cases and IT218R Assignment 10.1: Case study with multiple calculations of taxable capital gains and allowable capital losses Supplemental Assignment 10.1: Alternate case study with different fact pattern and amounts Notes: Updates: None CPA Competencies: Determines income taxes payable for an individual in routine situations o Sources and Computation of Taxable Income (b) Capital cost allowance (CCA) Exchanges of property replacement (C) Disposition of a building and land (C) (d) Taxable capital gains and allowable capital losses: General rules, definitions and computation (B) Identical property rule (B) Proceeds of disposition - allocation (B) Inadequate consideration, gifting (B) Election - disposition of Canadian securities (C) Business investment loss (B) Capital gains reserves (B) Principal residence (B) Listed personal property (B) Small business share rollover (B) Personal use property (B) Special rules (B) Dispositions to affiliated persons (C) Options and convertible property (B) Adjusted cost base - inclusions and deductions (B) Page 29 of 36

30 Lesson 11: Taxable Income, Taxes Payable, and Tax Credits Outcomes: Compute taxable income for an individual taxpayer Compute net Federal taxes payable for an individual taxpayer Presented: Topic 1: Calculation of Taxable Income for an Individual Define loss carry-over balances Compute taxable income for an individual Identify the capital properties that qualify for the lifetime capital gains deduction under section Topic 2: Calculation of Net Federal Taxes Payable for an Individual Compute personal tax credits with Section 118 of the Income Tax Act Compute tax payable under Part I of the Income Tax Act Describe tax payable under Part 1.2 of the Income Tax Act Topic 3: Tax Planning Identify when alternative minimum tax applies Identify tax planning opportunities for taxable income and personal tax credits Assessed: Assignment 11.1: Calculating Taxable Income and Taxes Payable for an Individual Compute personal tax credits with Section 118 of the Income Tax Act Compute tax payable under Part I of the Income Tax Act Compute taxable income for an individual Define loss carry-over balances Describe tax payable under Part 1.2 of the Income Tax Act Identify tax planning opportunities for taxable income and personal tax credits Identify the capital properties that qualify for the lifetime capital gains deduction under section Discussion 11.1: Alternative Minimum Tax Page 30 of 36

31 Identify when alternative minimum tax applies Quiz 11: Quiz 11.1 Compute personal tax credits with Section 118 of the Income Tax Act Compute tax payable under Part I of the Income Tax Act Compute taxable income for an individual Define loss carry-over balances Describe tax payable under Part 1.2 of the Income Tax Act Identify tax planning opportunities for taxable income and personal tax credits Identify the capital properties that qualify for the lifetime capital gains deduction under section Supplemental Assignment 11.1: Finding Taxable Income and Taxes Payable for an Individual Compute personal tax credits with Section 118 of the Income Tax Act Compute tax payable under Part I of the Income Tax Act Define loss carry-over balances Compute taxable income for an individual Describe tax payable under Part 1.2 of the Income Tax Act Identify tax planning opportunities for taxable income and personal tax credits Identify the capital properties that qualify for the lifetime capital gains deduction under section Reading: Byrd & Chen's Canadian Tax Principles, Edition Chapter 4, "Taxable Income and Tax Payable for Individuals" Chapter 11, "Taxable Income and Tax Payable for Individuals Revisited" Course-Level Assessment Milestone 11.1: Computation of Net Income, Taxable Income and Taxes Payable Compute taxable income payable for an individual taxpayer Compute Division B income for an individual taxpayer resident in accordance with Section 3 of the Income Tax Act Compute net Federal taxes payable for an individual taxpayer Determine an individual's Division B income, including taxable capital gains or losses in accordance with the Income Tax Act Page 31 of 36

32 Determine an individual's Division B income, including retirement, RRSP, retirement plans, and estate planning Apply the principles of income taxation to tax planning decisions for individual taxpayers Assessment Notes: Readings: Chapter 4: Topic 1 to 3 Chapter 11, except sections: Farm Losses Tax on Split Income (to be covered in Module 12) Discussion 11.1: Tax planning issues related to alternative minimum tax Assignment 11.1: Comprehensive question calculating taxable income and taxes payable for an individual Supplemental Assignment 11.1: Comprehensive question calculating taxable income and taxes payable for an individual Notes: Updates: Annual - Tax Credits (link document), deductions (lifetime capital gains exemption going to $800,000 in 2014 and then increasing with inflation each year after) CPA Competencies: Determines income taxes payable for an individual in routine situations o Computation of Taxes payable (b) Tax payable for an individual Tax payable under Part 1.2 (B) Non-refundable tax credits (B) Refundable tax credits (B) Alternative minimum tax (C) o (c) Computations of taxable income deductions Including donations, loss carry-overs, etc. (B) Rules applicable to all taxpayers: Foreign tax credit and political contributions credit (B) Page 32 of 36

33 Lesson 12: Tax Planning for Individuals Outcomes: Summarize routine tax planning opportunities for individual taxpayers Presented: Topic 1: Tax Planning Theory Define Non-Arm s Length Define Affiliated persons Topic 2: Non-Arm Length Transfers & Attribution Rules Compute the tax consequences on non-arm s length transfers of property with section 69 of the Income Tax Act Compute the tax consequences on inter-vivos transfers of property to a spouse with section 73 of the Income Tax Act Apply the attribution rules of sections 74.1, 74.2 and 74.5 of the Income Tax Act to transfers of property to a spouse or minor children Describe the tax treatment of indirect payments as per subsection 56(2) of the ITA Describe the tax implications on split income rules as per section of the Income Tax Act Compute shareholder benefits with section 15 of the Income Tax Act Assessed: Assignment 12.1: Tax Planning Issues for an Individual Define Non-Arm s Length Define Affiliated persons Compute the tax consequences on non-arm s length transfers of property with section 69 of the Income Tax Act Compute the tax consequences on inter-vivos transfers of property to a spouse with section 73 of the Income Tax Act Apply the attribution rules of sections 74.1, 74.2 and 74.5 of the ITA to transfers of property to a spouse or minor children Describe the tax implications on split income rules as per section of the Income Tax Act Apply the attribution rules of sections 74.1, 74.2 and 74.5 of the ITA to transfers of property to a spouse or minor children Page 33 of 36

34 Discussion 12.1: Tax Planning Compute shareholder benefits with section 15 of the Income Tax Act Describe the tax treatment of indirect payments as per subsection 56(2) of the ITA Quiz 12: Quiz 12.1 Define Non-Arm s Length Define Affiliated persons Compute the tax consequences on non-arm s length transfers of property with section 69 of the Income Tax Act Compute the tax consequences on inter-vivos transfers of property to a spouse with section 73 of the Income Tax Act Apply the attribution rules of sections 74.1, 74.2 and 74.5 of the ITA to transfers of property to a spouse or minor children Describe the tax treatment of indirect payments as per subsection 56(2) of the ITA Describe the tax implications on split income rules as per section of the Income Tax Act Compute shareholder benefits with section 15 of the Income Tax Act Supplemental Assignment 12.1: Individual Tax Planning Define Non-Arm s Length Define Affiliated persons Compute the tax consequences on non-arm s length transfers of property with section 69 of the Income Tax Act Compute the tax consequences on inter-vivos transfers of property to a spouse with section 73 of the Income Tax Act Apply the attribution rules of sections 74.1, 74.2 and 74.5 of the ITA to transfers of property to a spouse or minor children Describe the tax implications on split income rules as per section of the Income Tax Act Apply the attribution rules of sections 74.1, 74.2 and 74.5 of the ITA to transfers of property to a spouse or minor children Reading: Page 34 of 36

35 Byrd & Chen's Canadian Tax Principles, Edition Chapter 9, "Other Income, Other Deductions, and Other Issues" Course-Level Assessment Milestone 12.1: Tax Planning Advice, Application of Administrative Rules, and International Taxation Issues Determine Income Tax Act administration rules for individual taxpayers Explain international taxation issues facing individual taxpayers in Canada Summarize routine tax planning opportunities for individual taxpayers Assessment Notes: Readings: Chapter 9: Section, "Non-Arm's Length Transfer of Property", "Income Attribution" Discussion 12.1: Tax planning theory questions related to transfers of property between spouses Assignment 12.1: Theory questions related to tax planning issues for an individual Supplemental Assignment 12.1: Alternative questions related to tax planning issues for an individual. Notes: Updates: None CPA competencies: Assess general tax issues for an individual o Stakeholder Relationships: Non-arm's length and related persons (B) Affiliated persons (B) Determines income taxes payable for an individual in routine situations o Sources and Computation of Taxable Income Other sources of income inclusions and deductions: Indirect payments (B) Advises on specific tax-planning opportunities for individuals o Tax Planning for Corporations and Individuals Page 35 of 36

36 (a) Owner-manager tax-planning: shareholder and employee benefits and loans, deemed interest paid (C), tax on split income (kiddie tax) (C) Succession and Estate Planning o (a) Transfer of property to spouse (C) o (b) Transfer of property to children (C) o (c) income splitting and attribution rules (C) Page 36 of 36