Ch 6,8 & 9: Family Law, Risk Management & Tax Planning - 11%

Question 1

Attribution rules regarding Capital Gains

Answer 1

• Capital Gains stay with the Child or Grandchild

- What’s yours is mine (cash and property) and what’s mine is yours (tax)

Question 2

Transferrable non-refundable tax credits

A Tax Payers Dream

Answer 2

Age (65+)
Tuition
Pension
Disability

Question 3

LCGE- Lifetime Capital Gains Exemption

• Small business amount
• Farming and Fishing amount
• Formula to calculate persons capital gain

Answer 3

Small business- 2019- $867K ($866,912)
Farms and Fishing - 1M

Taxable CG = Actual CG - LCGE / 2

Note: CNIL (Cumulative Net Investment Losses) reduces the LCGE available

Question 4

CNIL (Cumulative Net Investment Losses) reduces the LCGE available

• explain
• formula

Answer 4

CNIL = investment expenses for a given year - investment income for a given year.

CNIL x MTR =

Question 5

CDTC (Charitable Donation Tax Credit)

• identify tier %’s
• $ entry point for rich folk tier
• how to calculate

Answer 5

• 15% on 1st $200 = $30
• 33% rich folk (portion= to amount to income 205K)
• 29% remaining
  i.e. 40K donation, income 240K
• $200 @15%= $30 credit
  + $35K @33% = $11,550 credit (240K-205K=35K)
  + $4,800 @29% = $1,392
  ____________________
  = $12,972 CDTC

Question 6

Listed Personal Property includes what?

Mnemonic - Coin Jars

Answer 6

Coins
Jewellery
Artwork
Rare manuscripts/books
Stamps

Question 7

LSVCC’s (Labour-Sponsored Venture Capital Corporation)

• rules: how much, carry over?
• how to calculate tax credit

Answer 7

Rules- on 1st 5K invested (annully)
- 15% federal credit + prov if applicable (MAX $1,500)
Calculate: AFTER TAX COST IN AN RRSP
Cost (5K)
minus RRSP tax savings (5K x MTR(45%) = $2,500)
minus federal 15% (5K x 15% = $750)
minus provincial tax credit (5K x15% = $750)
= After-tax cost of investment ($1,250)

Question 8

Company car rules

• how to lower taxable benefit
• what is Auto Allowance ($ per km)
• what is Stand-by Charge for purchased car, for leased car
• how to calculate total

Answer 8

- keep personal use to >50% of km's
Auto Allowance (Operating cost)
     - $0.58/ 1st 5,000km driven
     - $0.52/ km driven over 5K threshold
Stand-by:
     - monthly lease fee
     - 2% purchase price
Total Taxable Benefit = Operating + Stand-by

Question 9

Rules for Reimbursement of Moving Costs

(being able to deduct from taxable income)

Answer 9

• new job (not employer)
• old and new house in Canada
• min 40 km closer to work

NOTE: costs deducted from income earned from new job (i.e. can’t move, quit next day- and claim)

Question 10

Small business (CCPCs) tax applies to ?

What is the rate of federal tax paid?

Answer 10

• active CCPCs (Canadian-Controlled Private Corporations)
  TAX RATE:
• 1st 500K income @ 10.5%
• income over 500K @ 15%

Question 11

What is a SIB?

Answer 11

means- Specified Investment Business

• NOT eligible for small business deduction

Question 12

Mnemonic for calculating tax owed on Dividends

NOTE:

• Whether paid out in cash or as stock - tax implications are the same.
• included in client’s net income- could effect OAS etc.

Answer 12

Great Tax Credits Now

Calculate:
     Gross up dividend by 38%
     Tax owing = grossed up amount x MTR
     Credit = 15.02% grossed up amount
     Net taxable = T-ax owing - C-redit

Question 13

RESP

• income tier cut-offs
• contributions allowed up to when?
• must be closed by when
• EAP payments

Answer 13

• contribute up until 31st anniversary
• closed by Dec 31 of 35th anniversary
• EAP’s paid up to 6 months after enrollment

SPECIFIED PLAN EXCEPTION:

• have DTC
• contribute until 36 anniversary and closed by 40th anniversary

Question 14

RESP income cut-off levels

Answer 14

47,630 – x2 = 95,259 approx.

Low- Under $47,630 = $600—40%
Mid- = $550- 30%
Over- $95,259 = $500- 20%