Question

Question a.

Nisha Patel has a full time job as a nurse in her local hospital. In her spare time she has a goat farming operation. The goat farm began in 2016, and resulted in a loss of $10,000. She deducted the maximum allowable amount of the loss against her 2016 income. In 2017, most of the problems had been worked out, and Nisha had a profit from the farm operation of $5,000, as well as employment income of $100,000. Determine Ms. Patel's taxable income for 2017.

	$101,250
	$100,000
	$95,000
	$105,000

Question b.

Which of the following statements about Allowable Business Investment Losses is correct?

	If they are not used during the current year, they are added to the net capital loss balance.
	If they are not used during the current year, they are added to the non-capital loss balance.
	They can only be deducted against business income.
	They are losses that result from the disposition of shares or debt in a Canadian controlled public corporation.

Question c.

When an individual makes a gift of publicly traded securities to a registered charity, any capital gain that results from the disposition is deemed to be nil.

	True
	False

Answer 1

(a).The 50 percent you can claim is considered an allowable business investment loss. If this portion of the loss is greater than your total income, you can carry the remaining amount back to a previous year.

In $10000 she deducted maximum of 50% in 2016

in 2017 Taxable income of nisha is $105000

(b). An Allowable business income losses is a special type of allowable capital loss that is subject to preferential tax treatment. The special rule relating to an Allowable Business Investment Losses is that, unlike an ordinary allowable capital loss, it is deductible against all sources of income and not just taxable capital gains. Generally speaking, other allowable capital losses can be deducted only against taxable capital gains.

it is treated as a non-capital loss rather than a net capital loss. Also, it must be applied against all income for the current year to bring income to zero, even if no tax would otherwise be payable.

which in turn is a capital loss incurred on certain dispositions of debt or shares in small business corporations.

A business investment loss includes a capital loss from an actual disposition to an arm's length person (generally, a person not related to you) of

• a share of the capital stock of a small business corporation, or
• debt in a Canadian-controlled private corporation that is
• a small business corporation,
• bankrupt and that was a small business corporation at the time it became a bankrupt, or
• a corporation that was insolvent and a small business corporation at the time a winding-up order was made in respect of the corporation.

If they are not used during the current year, they are added to the non-capital loss balance. is Correct.

(c). When appreciated securities held for more than a year are donated to The Trust or another public charity, the donor generally enjoys an income tax charitable deduction for the asset’s full fair market value and avoids tax on the capital gain. This is probably the best known and most widely used tax benefit for charitable gifts.

The donor may use this deduction up to a limit of 30 percent of his or her “contribution base,” i.e., adjusted gross income computed without any net operating loss carryback. Donors to a private foundation have a deduction limit of only 20 percent of the contribution base. Donations beyond this limit may be carried forward for up to five tax years.

TRUE.