Chapter 1

Question 1

Progressive Approach

Answer 1

The more you earn, the higher the amount of taxes as a proportion of total income

Question 2

What happens if you don’t declare the true income?

Answer 2

Heavily punished: 1. Will be on their watch list forever 2. You will have to pay back the amount you owe plus interest and a fine

Question 3

How many parts does the Income Tax Act have?

Answer 3

17 parts (all broken into subdivisions)

Question 4

How to find Division B income?

Answer 4

3a: all types of income + 3b; net taxable capital gains - 3c: Deductions - 3d: negative amounts of 3a = Diviion B income

Question 5

What is taken in 3A income

Answer 5

Net employment income + net business income + net property income + other income

Question 6

What is taken in 3B income

Answer 6

Net taxable capital gains (taxable capital gains - allowable capital losses)

Question 7

What is taken in 3C income

Answer 7

Other deductions(-): moving expenses+attendant care+childcare expense+RRSP contributions

Question 8

What is taken in 3D income

Answer 8

The negative amounts of 3A

Question 9

Specified deductions to remove from Income Division B

Answer 9

Employee stock option deduction, home relocation loan deduction, life time capital gain deduction, losses from prior years

Question 10

Division B - specified deductions =

Answer 10

Taxable Income

Question 11

Resident is taxed on

Answer 11

worldwide income

Question 12

Non-resident is taxed on

Answer 12

only Canadian income

Question 13

Criteria to determine residency

Answer 13

1) Primary social and economic ties
2) Secondary residential ties
3) Temporary absences

Question 14

Primary Social and Economic Ties

Answer 14

1. Dwelling (house; except if it is being rented out at arms length
2. Spouse or Common Law: except if they didn’t live together before he leaves
3. Dependents: kids under 18

Question 15

Secondary residential Ties

Answer 15

1. Personal belongings: car, furniture
2. Economic ties: working outside but with a Canadian employer, or investing Canadian income in Canada
3. Social ties: active member of a class or club
4. Drivers license and medicare card, if you still renew them

Question 16

Temporary absences

Answer 16

1. intention
2. Frequency of visits
3. Residential ties outside of Canada

Question 17

What are deemed residents?

Answer 17

Physically not in Canada, but still subject to Canadian taxes (children follow the mother) + Do not live in a particular province, hence do not pay provincial taxes but instead 1.48 * federal taxes

Question 18

Types of deemed resident

Answer 18

Ambassadors, members of armed forces and sojourners

Question 19

Ambassadors and members of armed forces

Answer 19

If spouse and children move with the worker: they are all Canadian residents.
If worker meets someone abroad, that person will still be resident of their own country unless otherwise specified

Question 20

Sojourner’s rule

Answer 20

If someone spends more than 183 days of a calendar year in Canada, they will be automatically considered a deemed Canadian resident and have to pay Canadian taxes for the whole year.

Question 21

Part-Year residents

Answer 21

An individual coming/leaving Canada throughout the year will be considered a part time resident and will be taxed on Canadian income while he’s a non-resident and worldwide income while he is a resident

Question 22

The date to for Part-year resident is the latest of:

Answer 22

1. The date the individual leaves
2. The date the common law or spouse and dependent leave
3. the date the individual becomes resident of the country where he emigrated

Question 23

Non-residents are taxed on:

Answer 23

employment income made in Canada
Business income earned in Canada
Taxable capital gains from the disposition of Canadian property

Question 24

Who withholds taxes on non-residents?

Answer 24

The bank is the only agent who has access to the income earned by a non-resident so they are responsible for withholding 25% of their income

Question 25

Election for non-residents

Answer 25

A non-resident volunteers to make an income tax return because they think 25% is too high

Question 26

Tax treaties

Answer 26

An agreement between Canada and another country which will prohibit double taxation.
For example if in Canada, you were supposed 40% and the other country made you pay 30%, you will only have to pay the remaining 10% .

Question 27

A person is”

Answer 27

individual, corporation or trust

Question 28

Taxation year for individual

Answer 28

Calendar year

Question 29

Taxation year for corporation

Answer 29

Fiscal period (cannot exceed 53 weeks)

Question 30

Taxation year for a trust

Answer 30

Calendar year or other

Question 31

Residency for corporation

Answer 31

1. Incorporated in Canada after April 26th, 1965
2. Incorporated in Canada before April 26th, 1965 and kept on doing business after or mind and management
3. Incorporated outside of Canada, but moved mind and management in Canada, they will pay taxes only as long as they are here