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FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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AP 8-7 (Principal Residence Designation) Mr. Stewart Simms has lived most of his life in Vancouver. In 1997, he purchased a three bedroom home near English Bay for $125,000. In 2002, he acquired a cottage in the Whistler ski area at a cost of $40,000. In all subsequent years, he has spent at least a portion of the year living in each of the two locations. When he is not residing in these properties they are left vacant. On October 1, 2021, Mr. Simms sells the English Bay property for $515,000 and the cottage at Whistler for $320,000. Mr. Simms wishes to minimize any capital gains resulting from the sale of the two properties. Required: Describe how the two residences should be designated to optimize the use of the principal residence exemption. In addition, calculate the amount of the taxable capital gains that would arise under the designation that you have recommended. Show all supporting calculations.
Transcribed Image Text:AP 8-7 (Principal Residence Designation) Mr. Stewart Simms has lived most of his life in Vancouver. In 1997, he purchased a three bedroom home near English Bay for $125,000. In 2002, he acquired a cottage in the Whistler ski area at a cost of $40,000. In all subsequent years, he has spent at least a portion of the year living in each of the two locations. When he is not residing in these properties they are left vacant. On October 1, 2021, Mr. Simms sells the English Bay property for $515,000 and the cottage at Whistler for $320,000. Mr. Simms wishes to minimize any capital gains resulting from the sale of the two properties. Required: Describe how the two residences should be designated to optimize the use of the principal residence exemption. In addition, calculate the amount of the taxable capital gains that would arise under the designation that you have recommended. Show all supporting calculations.
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