The following financial information is provided for the 20X0 taxation year of Virginia Couture:
Interest income ………………………………………………………….. $20,000
Net loss from retail store for the year ended December 31, 20X0 ……… (7,000)
Gain on sale of public corporation shares ………………………………… 8,000
Loss on sale of shares of a CCPC qualified as a small business corporation. (10,000)
Dividends from foreign corporations, net of $300 withholding tax……… 2,700
Loss on sale of land that was originally purchased to build a rental property.
The project was cancelled after a rezoning application was lost…………. (38,000)
Gain on sale of an oil painting………………………………………………. 4,000
Director’s fees for attendance at corporate meetings ………………………. 6,000
Loss on sale of personal jewellery ………………………………………… (5,000)
In 20X0, Couture gifted shares of a Canadian-controlled public corporation (CCPC) to her 16-year-old son. The shares, which originally cost $8,000, had a value of $10,000 at the time of the gift.
Also, in 20X0, Couture had a rental loss of $3,000 (before amortization/depreciation and capital cost allowance). The property was originally purchased for $70,000 (land $9,000, building $61,000).The class 1 building had an unamortized capital cost of $50,000 at the end of the previous year. On the last day of 20X0, Couture sold the property for $100,000 (land $12,000, building $88,000). She intends to purchase a new rental property in early 20X1 for $200,000 (land $20,000, building $180,000).
In the previous year, by agreement, Couture obtained the exclusive licence to distribute a certain product in Canada. In 20X0, she divided the country into six sales territories and sold 10-year sub-licences to individuals in each territory. Total proceeds were $24,000.
Required:
1. Calculate Couture’s income for tax purposes for the 20X0 taxation year in accordance-with the aggregating formula of section 3 of the Income Tax Act.
2. What are the tax implications if Couture acquires the new rental property in 20X1?