Assignment 1

Question 1

A​ corporation’s dividend refund for the year is determined as​ ________.

a) the​ corporation’s taxable income will be taxed at a lower corporate rate until the LRIP is exhausted
b) the amount of dividends paid by a corporation and designated as eligible dividends
c) the lesser of the​ corporation’s refundable dividend tax on hand account balance at the end of the year and certain portion of the dividends declared by the corporation during the year
d) the​ corporation’s federal tax rate

Answer 1

c) the lesser of the​ corporation’s refundable dividend tax on hand account balance at the end of the year and certain portion of the dividends declared by the corporation during the year

Question 2

A​ company’s RDTOH account balance is​ ________.

a) an account that represents a calculation of the cumulative refundable taxes of the company
b) a separate tax account that represents the amount a company can distribute to its shareholders free of tax
c) an account that represents the amount a company has received from the payor of dividends in the form of a dividend​ gross-up
d) a separate account that tracks actual taxes previously paid on dividends received by the company

Answer 2

a) an account that represents a calculation of the cumulative refundable taxes of the company

Question 3

Which event will lead to an increase in a​ corporation’s Paid Up​ Capital?

a) payment to shareholders of a cash dividend
b) issuing new shares in exchange for cash
c) receipt of a capital dividend from another corporation
d) earning positive net income for the tax year

Answer 3

b) issuing new shares in exchange for cash

Question 4

The Additional Refundable Tax​ (“ART”) on investment income is designed to​ ________.

a) encourage Canadian corporations to invest in other Canadian​ corporations, rather than foreign corporations
b) achieve a lower overall​ (corporate and​ shareholder) rate on income from investments in Canadian companies
c) redistribute the corporate tax burden from low income corporations to higher income corporations
d) maintain tax integration while preventing use of a corporate entity to defer significant amounts of taxes payable

Answer 4

d) maintain tax integration while preventing use of a corporate entity to defer significant amounts of taxes payable