Anna Osinski acquired a townhouse unit in 2019 for $120,000 (land $10,000, building $110,000). She bought the unit in order to rent it. By the end of 2021, the undepreciated capital cost of the building was $103,500. In August 2022, Anna decided to live in the unit herself. At that time, similar townhouses were selling for $136,000 (land $12,000, building $124,000). Prior to August, her 2022 net rental income before capital cost allowance was $1,000. In September 2022, Anna purchased, for rental purposes, a residential condominium unit for $145,000 (land $15,000, building $130,000). Between September and the end of the taxation year, the condo earned net rentals of $900 before capital cost allowance.

Anna Osinski acquired a townhouse unit in 2019 for $120,000 (land $10,000, building $110,000). She bought the unit in order to rent it. By the end of 2021, the undepreciated capital cost of the building was $103,500. In August 2022, Anna decided to live in the unit herself. At that time, similar townhouses were selling for $136,000 (land $12,000, building $124,000). Prior to August, her 2022 net rental income before capital cost allowance was $1,000. In September 2022, Anna purchased, for rental purposes, a residential condominium unit for $145,000 (land $15,000, building $130,000). Between September and the end of the taxation year, the condo earned net rentals of $900 before capital cost allowance.

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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Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

Anna Osinski acquired a townhouse unit in 2019 for $120,000 (land $10,000, building $110,000). She bought the
unit in order to rent it. By the end of 2021, the undepreciated capital cost of the building was $103,500. In August
2022, Anna decided to live in the unit herself. At that time, similar townhouses were selling for $136,000 (land
$12,000, building $124,000). Prior to August, her 2022 net rental income before capital cost allowance was $1,000.
In September 2022, Anna purchased, for rental purposes, a residential condominium unit for $145,000 (land
$15,000, building $130,000). Between September and the end of the taxation year, the condo earned net rentals of
$900 before capital cost allowance.
Required:
Determine the Change to Anna's 2022 net income for tax purposes as a result of the above activity.
Change to net income
$
0

Less CCA
Recapture
Rents condo
Rents townhouse.
Taxable Capital gains:

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