Module 6: Capital gains and losses - PD Net

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Self-test 6 solution 8
a. Alex has a taxable capital gain on the coins, which are LPP, of:
Proceeds $10,400
Less ACB (minimum rule) 1,000
Gain $ 9,400
Taxable capital gain 4,700
Net capital losses forward* 4,700
Net taxable capital gain $ 0
*The 2005 losses forward are useable against the LPP gain; the 2002 losses have expired as LPP
losses can only be carried forward for seven years. Alex has $300 in LPP losses forward
remaining.
b. Micheline can deduct 50% of the capital loss on the bad debt as an allowable business
investment loss. It is not necessary that she actually dispose of this receivable as subsection
50(1) allows the loss to be recognized when it becomes a bad debt. If Micheline had not charged
interest on this loan, she would be unable to do this as the investment would not have been
made to earn income, and it would then be considered a personal-use property.
c. A superficial loss is an addition to the ACB of the shares under paragraph 53(1)(f). While the
original cost of the shares was equal to the FMV at the date of inheritance, this is now irrelevant
as those shares were sold and new ones acquired. The superficial loss is added to the new cost
of $25,000. The ACB of the shares then is $28,000.
Proceeds of disposition $150,000
Deduct: adjusted cost base 28,000
Capital gain 122,000
Taxable capital gain (50%) $ 61,000
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