QUESTION ONE

Determine the amount of interest to be included in income in Years 1, 2, and 3 for each of the
following situation. Income tax reference: ITA 12(1)(c), 12(3), (4), (11).

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• Debra purchased a $10,000 bond on its issue date, November 1, Year 1.The bond pays
interest at 6%, compounded annually. Debra will receive the interest when the bond matures
on October 31, Year 3.

QUESTION TWO

Anne received the following dividend income during the current year:

• $1,000 of eligible dividends from taxable Canadian corporations

• $1,000 of non-eligible dividends from taxable Canadian corporations

• $1,000 of foreign dividends. The foreign country withheld $150 in foreign tax and Anne
received the net amount of $850.

Determine the amount of dividend income to be included in Anne’s property income for the current
year. Income tax reference: ITA 12(1)(j), (k), 82(1).

QUESTION FOUR

At the end of the current year, Fred owned two residential rental properties. Rental property #1
cost $125,000 (land $50,000; building $75,000) and at the close of last year had a UCC of
$64,000. Rental property #2 was acquired in the current year for $210,000 (land $80,000; building
$130,000). Revenue and expenses for the rental properties during the year were as follows:

Property #1 Property #2 Total

Revenue $13,200 $4,500 $17,700

Expenses:
Mortgage interest (0) (3,000) (3,000)
Repairs & maintenance (5,000) (0) (5,000)
Property tax (3,100) (1,000) (4,100)
Insurance (500) (200) (700)
(8,600) (4,200) (12,800)

Income $ 4,600 $ 300 $ 4,900

Determine the maximum CCA deduction for the rental properties for the current year. Income tax
reference: Reg. 1100(11), 1101(1ac).