PART A: CAPITAL GAINS
Development Corp., a commercial development company, acquired vacant property in 2012 at a cost of $1.5 million. Once acquired, they also spend an additional $150,000 to clear and level the land for future development. The company had planned to build a mini-mall on the property, and secured the necessary permits, zoning and had plans drawn up by a construction firm. The land value has grown significantly over the past few years. They decided not to pursue the development and are contemplating the following actions:
a. Sell the land to a company interested in continuing the planned project
b. Subdivide the land and sell it as building lots
c. Hold onto the land and build the mini mall in 5 years.
Further, they borrowed the money to purchase the land in the first place, and have interest payments and property taxes to pay.
REQUIRED: Comment on whether each proposed transaction would be determined as a gain on account of capital or income.
PART B: Personal Income and Deductions
Mr. John B Taxpayer has two children aged 5 and 7. His spouse works full time earning a salary of $52,000. Mr. Taxpayer has secured childcare and paid an amount of $8200 combined for the year. Mr. Taxpayer has claimed eligible dividends of $13,000 from taxable Canadian corporations, as well as $8,000 in interest income. Mr. Taxpayer also deducted the childcare expenses on his tax return.
REQUIRED: Will this be an eligible deduction? Why or why not (provide references where appropriate).
PART C: Administration and Enforcement
Gwendlyn has recently moved to Canada, she has incorporated a company with a year end of October 31st. She pays herself a salary and dividends. She has requested some information from you as it relates to Taxes in Canada. Please respond to each question separately: (provide a full explanation to your response)
a. Do I have to file a tax return?
b. How do I file a tax return?
c. When do I have to file a tax return?
d. If I owe money on my personal taxes, when do I have to pay them?
e. What if I don't file?