In 2020, Mackenzie Had Employment Income of $40,000, Property Income

question 8

Essay

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 $0.
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?

• 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?

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