FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question

Based on Ontario tax laws

1) Capital Gain on the Properties Maggie bought a house in 2001 for $330,000. She fixed it up with paint and wallpaper but in 2003 she did a major renovation which cost her $105,000. In the same year when she bought the house, she also bought a cottage for $160,000. She winterized it immediately by spending $20,000. Maggie also spent other $32,000 on the cottage in 2005 on the new roof, new siding, new windows and new doors. The Fair Market Value of the cottage in December 2021 is $550,000. Real Estate prices have increased by 6% over time on the house. She sold both the properties in December 2021 and paid commission of 4% to the Agent for this. Question: Calculate taxable capital gain on the sale of the House? Calculate taxable capital gain on the sale of the Cottage? Calculate tax liability in the year of sale on the House and the Cottage assuming she is in a 30% Marginal Tax Rate.
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Transcribed Image Text:1) Capital Gain on the Properties Maggie bought a house in 2001 for $330,000. She fixed it up with paint and wallpaper but in 2003 she did a major renovation which cost her $105,000. In the same year when she bought the house, she also bought a cottage for $160,000. She winterized it immediately by spending $20,000. Maggie also spent other $32,000 on the cottage in 2005 on the new roof, new siding, new windows and new doors. The Fair Market Value of the cottage in December 2021 is $550,000. Real Estate prices have increased by 6% over time on the house. She sold both the properties in December 2021 and paid commission of 4% to the Agent for this. Question: Calculate taxable capital gain on the sale of the House? Calculate taxable capital gain on the sale of the Cottage? Calculate tax liability in the year of sale on the House and the Cottage assuming she is in a 30% Marginal Tax Rate.
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