When Establishing Whether the Sale of an Asset Is Capital

question 3

Multiple Choice

When establishing whether the sale of an asset is capital income or business income, which of the following is not one of the factors which the courts take into consideration when determining the original intention of a transaction?

• A)Number and frequency of transactions
• B)Period of ownership
• C)Relation of transaction to taxpayer's business
• D)Canadian residency test

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Definitions:

Risk-free Rate

The anticipated earnings on an investment considered free from financial risk, usually related to sovereign bonds.

Arbitrage Opportunity

This refers to the chance to buy an asset at a low price in one market and simultaneously sell it at a higher price in another, realizing a profit without risk.

Expected Return

The weighted average of all possible returns from an investment, factoring in the probabilities of each outcome.

Firm-characteristic Variables

Factors specific to a company that can influence its stock price, such as size, earnings, and debt levels.