Basics of Taxation

Question 1

Taxable as Separate Entity

Answer 1

Trusts, corporations, partnerships with more than 5 partners (still close to individual taxation)

Question 2

Deadlines

Answer 2

Spouse of taxpayer, april 30th/june 15th
Deceased taxpayer - 180 days after death or same as living
Corp - 180 day filing deadline, 60 or 90 days after corp’s year end
Partnership with more than 5 partners march 31 (income/losses reported personally)
Testamentary trust - 90 days after trusts year end
inter vivos - april 30th

Question 3

Notice of Reassessment Deadline and Time to Disagree

Answer 3

CRA has 3 years from filing date (may request 4 years beyond that if fraud or misrepresentation). taxpayer Must retain returns for 6 years.
Taxpayer has 90 days after notice or one year after the original return to object, whichever is later.
corps have 90 days after assessment.

Question 4

Tax Folio’s

Answer 4

Plain language explanations of tax law. They do not have the force of law.

Question 5

Tax planner/preparer penalties

Answer 5

planner penalty - penalty of $1k or tax savings another taxpayer received 50k savings=50k penalty
preparer penalty - 1k or the lesser of 100k plus the taxpayers savings and the penalty the taxpayer would have to pay

Question 6

Prescribed rate determination and compounding for late payments

Answer 6

prescribed rate = 90 day t-bill rounded up to the nearest percentage + 4%, compounded monthly p/y and c/y = monthly

Question 7

Late filing penalty (and repeate offenders)

Answer 7

5% of balance + 1% per month for up to 12 month.

repeat = 10% + 2% for up to 12 months

Question 8

Unreported Income Penalties

Answer 8

least of 10% of unreported income 50% of the difference between unstated and amount of tax withheld

Question 9

Gross negligence (evaded taxes, repeat offenders) penalties

Answer 9

greater of $100 and 50% of benefit gained

Question 10

Installment Requirements

Answer 10

owe more than 3000 in 2 consecutive years

Question 11

Specified employee ownership percentage

Answer 11

10%

Question 12

Maximum farming loss if secondary income

Answer 12

17500 per year, can be carried back 3 years or forward 10 years and used against farming income if not used in same year.

Question 13

Self employment income

Answer 13

partnership general partner, sole prop, rental owner, farmer or fisher

Question 14

Capital Losses in year of death

Answer 14

can offset regular income (allowable capital losses) and in the year prior to death. losses to the estate can also bne applied against terminal return in 1st year)

Question 15

Taxation of Life insurance Dispositions

Answer 15

taxed as regular income

Question 16

Multi year GIC taxation

Answer 16

tax paid in tax year of gics anniversary (start in 2021 doesn’t have any tax until 2022 tax year)

Question 17

Not taxable sources of income

Answer 17

most insurance policies, winnings, return of capital, inheritance, rollover, gifts

Question 18

Deductions to arrive at taxable income

Answer 18

total income - rrsp or business expenses = net income -lcge - stock option deductions - northern residents, canadian armed forces,

Question 19

Ontario Surtax Rate

Answer 19

20% surtax at 4,874 (79k) and 36% (56% total) surtax at 6237 (93k). makes tax credits more valuable. surtax applies to tax payable, so even tax credit at lowest rate reduces surtax

Question 20

Basic personal amount reduction and transfer

Answer 20

1.4% above 150k. can be transferred to spouse if not totally used (will create tax credit at lowest rate)