You are working at Grey Company. You purchased a house in 2020. Gray Company gave you a housing loan on May 1, 2020 for $80,000 at a rate of 2 percent interest. You pay the interest on the loan every month. The 2020 prescribed interest rates are as follows:        First quarter                                5%      Second quarter                           4%      Third quarter                               3%      Fourth quarter                             3%   What is your taxable benefit on the above loan for 2020? A) Nil. B) $267.40. C) $670.68. D) $1,073.97. E) $2,147.95. F) $667.40.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Question 3 - show calculations) You are working at Grey Company. You purchased a house in 2020. Gray Company gave you a housing loan on May 1, 2020 for $80,000 at a rate of 2 percent interest. You pay the interest on the loan every month. The 2020 prescribed interest rates are as follows:

 

     First quarter                                5%

     Second quarter                           4%

     Third quarter                               3%

     Fourth quarter                             3%

 

What is your taxable benefit on the above loan for 2020?

  1. A) Nil.
  2. B) $267.40.
  3. C) $670.68.
  4. D) $1,073.97.
  5. E) $2,147.95.
  6. F) $667.40.
Part 1 (ITA 3)
Division B Net Income to Division C Taxable Income to Taxes Payable for Individuals
ITА 3(a)
+ Bin #1- Net Employment - losses carry forward 20 years and carry back 3 years (carrying baskets)
+ Bin # 2 - Net Business & Property – losses carry forward 20 years and carry back 3 years (carrying baskets)
+ Bin # 4 - Other Income
ITА 3 (b)
+ Bin # 3 – Net Capital – losses carry forward for infinity and carry back 3 years (carrying basket)
IТА З (c)
- Bin # 5 - Other Deductions
= Sources of Income
ITA 3 (d)
Losses in current year from Bins 1, 2, 4
= Division B Net Income
Equivalent to Capital Gains Deduction for Employee Stock Options
ITA 110
Payments included to calculation Division B but not included for Division C (e.g. social assistance)
- Losses from other years (carrying baskets Bin #1 & 2)
ITA 111
Losses from other years (carrying basket Bin #3 limited to Net Capital Income included in ITA 3 (b)
= Division C Taxable Income
x Applicable Tax Rates
ΙΤΑ 118
Tax Credits
= Division E Taxes Payable for Individuals
Transcribed Image Text:Part 1 (ITA 3) Division B Net Income to Division C Taxable Income to Taxes Payable for Individuals ITА 3(a) + Bin #1- Net Employment - losses carry forward 20 years and carry back 3 years (carrying baskets) + Bin # 2 - Net Business & Property – losses carry forward 20 years and carry back 3 years (carrying baskets) + Bin # 4 - Other Income ITА 3 (b) + Bin # 3 – Net Capital – losses carry forward for infinity and carry back 3 years (carrying basket) IТА З (c) - Bin # 5 - Other Deductions = Sources of Income ITA 3 (d) Losses in current year from Bins 1, 2, 4 = Division B Net Income Equivalent to Capital Gains Deduction for Employee Stock Options ITA 110 Payments included to calculation Division B but not included for Division C (e.g. social assistance) - Losses from other years (carrying baskets Bin #1 & 2) ITA 111 Losses from other years (carrying basket Bin #3 limited to Net Capital Income included in ITA 3 (b) = Division C Taxable Income x Applicable Tax Rates ΙΤΑ 118 Tax Credits = Division E Taxes Payable for Individuals
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