Mr beau truett has always believed that real estate was a better investment than equity securities while real estate has a downside in its

340 Chapter 7 Assignment Problems Assignment Problem Seven -3 (Rental Income) Mr. Beau Truett has always believed that real estate was a better investment than equity securi ties. While real estate has a downside in its lack of liquidity, it has three major advantages: Current taxation can be avoided through the deduction of CCA. In fact, if properties a heavily financed, there can be current losses on real estate that can shelter other types of Over long periods of time, gains can be enormous. Further, as these gains are, in general capital gains, only one-half will be subject to taxation. Taxation of any increase in value of a property can be deferred until that property is sold income from taxation. lased on these views, Beau has, for many years, actively invested in rental properties. At the beginning of 2017, he owns four such properties. Relevant information on these properties for the year ending December 31, 2017, is as follows: 13 Jane The cost of this property was $825,000, of which $650,000 was allocated to the building and $175,000 was allocated to the land on which it was situated. It is in a separate Class 1 with a January 1, 2017 UCC balance of $531,044. During 2017, its net rental income, before the deduction of CCA, was calculated as follows: $42,000 Rents Property Taxes $ 7,000) 16,250) 8,600) Mortgage Interest 31,850) Other Expenses (Other Than CCA) Net Rental Income (Before CCA) 146 Bronsen This property has been held for many years and had an original cost of $48,000. This was divided into $36,000 for the building and $12,000 for the land. It is included in a single Class 3, along with 27 Front (see next property). The UCC balance in this Class on January 1, 2017 is $21,000. During 2017, the property was sold for $146,000, with $110,000 being allocated to the building and $36,000 to the land. Prior to its sale, net rental income was recorded as follows: Rents Property Taxes Mortgage Interest Other Expenses (Other Than CCA) $13,500 ($1,500) 1,400) 1,100) 4,000) S 9.500 27 Front This property had an original cost of $58,000, allocated $42,000 to the building and $16,000 to the land. It is included in the Class 3 balance with 146 Bronsen. For 2017, the property had net rental income, before the deduction of CCA, calculated as follows: Rents Property Taxes Mortgage Interest Other Expenses (Other Than CCA) Net Rental Income (Before CCA) $16,700 (S 1,800) 6,500) 10,2 4826 Jarvus This property had an original cost of $750,000, allocated $600,000 to the building and $150,000 to the land. It is included in a separate Class 1 with a January 1, 2017 UCC balance of $479,439. During 2017, its net rental income, before the deduction of CCA, was calculated as follows 340 Chapter 7 Assignment Problems Assignment Problem Seven -3 (Rental Income) Mr. Beau Truett has always believed that real estate was a better investment than equity securi ties. While real estate has a downside in its lack of liquidity, it has three major advantages: Current taxation can be avoided through the deduction of CCA. In fact, if properties a heavily financed, there can be current losses on real estate that can shelter other types of Over long periods of time, gains can be enormous. Further, as these gains are, in general capital gains, only one-half will be subject to taxation. Taxation of any increase in value of a property can be deferred until that property is sold income from taxation. lased on these views, Beau has, for many years, actively invested in rental properties. At the beginning of 2017, he owns four such properties. Relevant information on these properties for the year ending December 31, 2017, is as follows: 13 Jane The cost of this property was $825,000, of which $650,000 was allocated to the building and $175,000 was allocated to the land on which it was situated. It is in a separate Class 1 with a January 1, 2017 UCC balance of $531,044. During 2017, its net rental income, before the deduction of CCA, was calculated as follows: $42,000 Rents Property Taxes $ 7,000) 16,250) 8,600) Mortgage Interest 31,850) Other Expenses (Other Than CCA) Net Rental Income (Before CCA) 146 Bronsen This property has been held for many years and had an original cost of $48,000. This was divided into $36,000 for the building and $12,000 for the land. It is included in a single Class 3, along with 27 Front (see next property). The UCC balance in this Class on January 1, 2017 is $21,000. During 2017, the property was sold for $146,000, with $110,000 being allocated to the building and $36,000 to the land. Prior to its sale, net rental income was recorded as follows: Rents Property Taxes Mortgage Interest Other Expenses (Other Than CCA) $13,500 ($1,500) 1,400) 1,100) 4,000) S 9.500 27 Front This property had an original cost of $58,000, allocated $42,000 to the building and $16,000 to the land. It is included in the Class 3 balance with 146 Bronsen. For 2017, the property had net rental income, before the deduction of CCA, calculated as follows: Rents Property Taxes Mortgage Interest Other Expenses (Other Than CCA) Net Rental Income (Before CCA) $16,700 (S 1,800) 6,500) 10,2 4826 Jarvus This property had an original cost of $750,000, allocated $600,000 to the building and $150,000 to the land. It is included in a separate Class 1 with a January 1, 2017 UCC balance of $479,439. During 2017, its net rental income, before the deduction of CCA, was calculated as follows