dave@utcsrgv.UUCP (Dave Sherman) (08/08/84)
For the record, the "general averaging" mechanism which was
done away with upon the introduction of forward averaging
(November 1981 budget) provided averaging over 5 years, not 3.
Here's the algorithm, as set out in the Income Tax Act (section
118(1), as in effect in 1981):
where, in the case of an individual who was resident in Canada
throughout the taxation year immediately preceding a particular
taxation year (which particular taxation year is hereafter in this
section referred to as the "year of averaging"), any excess remains when
(a) the greater of 110% of his income for the immediately preceding
taxation year and 120% of the quotient obtained when
(i) the aggregate of all amounts each of which is the individual's
income for a taxation year in the period of such of the consecutive
taxation years (not exceeding 4) immediately preceding the year of
averaging as were years throughout which he was resident in Canada
is divided by
(ii) the number of years in the period described in subparagraph (i)
is deducted from
(b) the individual's income for the year of averaging,
(which excess is hereafter in this subsection referred to as the
"averaging excess"), the tax payable by the individual under this
Part upon his amount taxable for the year of averaging is the
aggregate of
(c) the amount that would be determined under section 117 for the
individual for the year of averaging if his amount taxable for the
year were the remainder, if any, obtained when the averaging excess
is deducted from the individual's amount taxable for the year computed
without regard to this subsection, and
(d) 5 times the amount, if any, by which
(i) the amount that would be determined under section 117 for the
individual for the year of averaging if his amount taxable for the
year were the aggregate of the remainder described in paragraph (c)
and an amount equal to the lesser of the averaging excess and the
individual's amount taxable for the year of averaging
exceeds
(ii) the amount determine under paragraph (c).
Obvious, isn't it? Honorary law degree to anyone who can figure
that out in 5 minutes or less.
(Actually, I just wanted to give you all a flavour of what those
of us who work with the Income Tax Act have to face every day.)
Dave Sherman
The Law Society of Upper Canada
Toronto
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