Mr Helms Acquired two tracts of Land near Ottawa 5 years ago. Tract A cost $7100

Question

Mr Helms Acquired two tracts of Land near Ottawa 5 years ago. Tract A cost $71000, while Tract B cost $87000. On july 1, 2015, Tractv A is sold for $127000. the terms of the sale require a down payment of $17000. a payment of $25000 is required on january 1, 2016.

Also on July 1, 2015, Tract B is sold for $106000. the terms ofn the sale require a down payment of $32000. Not further payment on the principal amount is requie=red for five years.

Required: Determine the amount of nthe minimum taxabloe capital gains that will have to be included in Ms. helm's net income for tax purpose for both 2015 and 2016.

Explanation / Answer

Capital gain to be included in net income will depend upon full amount recieved on any given year.

Since we have recieved only down payment and in subsequent years, payment will be made gradually therefore taxable income will come only when full amount is paid off. It will be calculated on profit.

Till the time full payment is not recieved it will not come under taxable income.

Tract A Tract B Cost 71,000 87,000 SP 127,000 106,000 Down Payment (2015) 17,000 32,000 Down Payment (2016) 25,000 0

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