Chapter 11 – Solutions to Assignment Problems Solution to AP 11-1 2020 Analysis The required information can be calculated as follows: ITA 3(a) Business Income $18,000 Taxable (Grossed Up) Dividends 2,360 $20,360 ITA 3(b) Taxable Capital Gains $ 600 Allowable Capital Losses (2,100) Nil ITA 3(c) ITA 3(d) Unrestricted Farm Loss (See Note) $20,360 (6,250) 2020 Net Income and Taxable Income $14,110 Note Ms. Breau’s farm losses are restricted as follows: Total Farm Loss Unrestricted Amount: First $2,500 $10,000 ($ 2,500) One-Half of $7,500 ($10,000 – $2,500) (3,750) (6,250) 2020 Restricted Farm Loss $ 3,750 As noted in the problem, none of the losses can be carried back before 2020. This would leave the following 2020 loss carry over balances: • 2020 Restricted Farm Loss $3,750 • 2020 Net Capital Loss [($2,100 (ITA 3(b)(ii)) – $600 (ITA 3)(b)(i))] $1,500 In this first year the taxable income is less than the required $15,000 to fully utilize available personal tax credits; however, there is no choice to limit any of the ITA 3 amounts to a smaller amount so as to achieve the $15,000 taxable income. 2021 Analysis The required information can be calculated as follows: ITA 3(a) Farm Income $ 2,000 Taxable (Grossed Up) Dividends 2,950 $4,950 ITA 3(b) Taxable Capital Gains Allowable Capital Losses $ 1,000 Nil 1,000