TIF Problem Six - 3 Business Income - Multiple Choice 6. Jerry collects baseball cards as a hobby. During the current year, he acquired twenty-five different items at a total cost of $29,550. During the year, he sold each of those items and received total proceeds of $55,900. What is the effect ofthese transactions on Jerry's Net Income For Tax Purposes? A. Jerry has a taxable capital gain of $26,350. B. Jerry has a taxable capital gain of 13,175. C. Jerry has business income of $26,350. D. Because the collection was a hobby, the gain does not have to be included in Net In- come For Tax Purposes. 7. Which of the following is correct? A. In determining whether a disposition is capital or business in nature, the number and frequency of transactions is taken into account. B. Ataxpayer must include 50 percent of both business income and capital gains in their Taxable Income. C. Amounts collected under an insurance policy are considered capital gains. D. The sale of a depreciable asset can result in a capital gain or capital loss. 8. Marvin purchased a large piece of land 5 years ago when a highway bypass was rumoured to have an exit being built nearby. He had planned to subdivide the land into building lots within 5 years, but has done no work on the land yet. He has rented the land each summer over the Labour Day weekend for $500. A local non-profit organization holds a huge neighbourhood garage sale on that weekend. A heart attack has convinced Marvin to slow down. As a result, he has advertised the land for sale online and an interested buyer is of- fering to purchase it at a price that would give him a large gain. That gain would be taxed as: A. property income. B. business income. C. a capital gain. D. a taxable capital gain. Inclusions And Reserves 9. With respect to determining net business income for tax purposes, which ofthe following statements is NOT correct? A. A reserve that is deducted in the current taxation year, must be added back to income in the following taxation year. B. Bad debts written off in the previous year for tax purposes that are recovered in the current year must be added to net business income for tax purposes for the current year. C. Amounts received for goods to be delivered in the future must be included in the de- termination of net business income for tax purposes. D. As long as some part of the proceeds for goods sold is not collectible until future peri- ods, a reserve for uncollected amounts can be deducted. 10. A business may sometimes receive amounts of cash for goods or services to be delivered in a future taxation year. Under the requirements of the Income Tax Act, these amounts should be: A. included in revenue when the goods or services are delivered. B. included in revenue no later than 180 days after the end of the taxation year. C. allocated to revenue over the period between the time the cash is received and the time the goods and services are delivered. D. included in revenue when the cash is received