In 2020, Mackenzie had employment income of $40,000, property income of $3,000, a business loss of $22,000, an allowable business investment loss of $5,000, income from an RRSP withdrawal of $2,000, and a capital loss of $40,000 on the sale of shares in a public corporation. Mackenzie hopes that the losses will result in a net income for tax purposes of $O. Required: A) Determine Mackenzie's net income for tax purposes in accordance with Section 3 of the Income Tax Act. B) Based on your answer in Part A, explain to Mackenzie why there will or will not be a tax liability this year, assuming that the taxable income will be equal to the net income for tax purposes. C) How would your answer change in Part A if Mackenzie realized a taxable capital gain of $30,000 in 2020?

In 2020, Mackenzie had employment income of $40,000, property income of $3,000, a business loss of $22,000, an allowable business investment loss of $5,000, income from an RRSP withdrawal of $2,000, and a capital loss of $40,000 on the sale of shares in a public corporation. Mackenzie hopes that the losses will result in a net income for tax purposes of $O. Required: A) Determine Mackenzie's net income for tax purposes in accordance with Section 3 of the Income Tax Act. B) Based on your answer in Part A, explain to Mackenzie why there will or will not be a tax liability this year, assuming that the taxable income will be equal to the net income for tax purposes. C) How would your answer change in Part A if Mackenzie realized a taxable capital gain of $30,000 in 2020?

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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