Your client, Ashley, has come to you for some advice on computing her net income from property.
(a) In February, Ashley sold all her investments and paid off her personal residence mortgage. On March 1, she borrowed $90,000 to reacquire many of the same investments she previously held. Many of the common shares purchased do not carry dividend rights. Her spouse has insisted that 50% of the investments be placed in his name.
(b) On April 15, Ashley purchased a government bond that pays annual interest of 7%. When the bond was purchased, Ashley paid accrued interest of $262.50 to the previous owner of the bonds.
(c) On June 1, Ashley borrowed $450,000 to purchase the vacant land next to her apartment block. The land is used as a parking lot and she collected monthly revenues of $2,500. She plans improvements that will double her income from the lot. Ashley's only expenses were $45,500 for interest and property taxes.
REQUIRED
Discuss the income tax implications of each item above.