Chapter 8

Question 1

Tax planning strategies can be grouped into three broad categories:

Answer 1

Eliminate Taxes
Reduce Taxes
Defer Taxes

Question 2

Tax returns must be filed by this date, unless the individual is self-employed and unincorporated, then the deadline for submission is extended to….

Answer 2

April 30th

June 15th

Question 3

Although self-employed individuals have an extension on their tax submission date, you still must pay any balance on taxes owing by…

Answer 3

April 30th

Question 4

This tax slip lists the amount of income (such as interest, dividends, and capital gains) distributed to investors holding mutual fund trust units in a non registered account. This type of slip is also used to report amounts allocated from trusts such as estates and family trusts.

Answer 4

T3

Question 5

This tax slip documents total compensation paid to an employee, including any commissions earned, taxable benefits provided and amounts withheld for source deductions.

Answer 5

T4

Question 6

This tax slip provides details of amounts paid from pension plans and many other sources, including annuities, scholarships, and registered education savings plans.

Answer 6

T4A

Question 7

This tax slip is normally issued by financial institutions. It reports interest, dividends, and capital gains paid to individuals. The capital gains typically result from transactions within corporate class mutual funds, and not from the sale of securities by the taxpayer. Private corporations, such as investment holding companies, also issue this slip to report dividend amounts paid to shareholders.

Answer 7

T5

Question 8

This tax slip reports amounts received from the disposition of securities for taxable accounts. Many investment firms do not issue these individual tax slips to account holders for each security disposition, instead consolidating all dispositions on a statement that shows the dispositions that have taken place in the investment portfolio

Answer 8

T5008

Question 9

For two-parent families, child care expenses must be deducted by the spouse with…..

Answer 9

the lower income

Question 10

reduces the taxable income on which federal tax is calculated.

Answer 10

A Tax Deduction

Question 11

a specific reduction of taxes payable

Answer 11

A Tax Credit (such as electric cars)

Question 12

With _____ _____, its value is equal to the stated amount multiplied by the lowest graduated tax rate (15%)

Answer 12

tax credits

Question 13

Moving expenses are tax deductible when…

Answer 13

the new residence is at least 40 km. closer to the new work location than the former residence.

Question 14

You are not eligible for the age credit when your income exceeds

Answer 14

$98,309

for 2023

for 2024: could be $102,925

Question 15

Can you carry forward unused tuition credits?

Answer 15

Yes, you may either carry these credits forward to use in future years or transfer them to a spouse, parent, or grandparent. If you choose to transfer them, you can only do it in the year the tax credit is earned.

Question 16

This is the rate applicable to each additional dollar of income a taxpayer earns

Answer 16

marginal tax rate

Question 17

This tax rate (Also called the effective tax rate) is calculated by dividing the total amount of net taxes owing by taxable income.

Answer 17

Average tax rate

Question 18

It reduces the taxable income on which federal tax is calculated. Thus, it reduces the amount of tax the taxpayer owes, based on the combined federal and provincial marginal tax rate for a particular year.

Answer 18

tax deduction

Question 19

It’s an arrangement that permits an employee to buy employer company’s shares at a stated price for a stated period. The exercise price is normally at or above the stock’s market value when granted.

Answer 19

employee stock option plan

Question 20

A disability due to injury or illness that prevents an employee from working at his or her job for a temporary period, the length of which is specific to each employer and insurer.

Answer 20

short-term disability

Question 21

If an employer makes a company car available for an employee’s personal use, an amount for that use must be included in the employee’s income.

Answer 21

stand-by charge

Question 22

This is income that remains after subtracting additional deductions from net income.

Answer 22

taxable income

Question 23

Some employees attempt to avoid paying tax on employment income by having some of their pay held back and paid later. This is allowed in only a small number of cases.

Answer 23

deferred compensation

Question 24

It is a specific reduction of taxes payable. Its value is equal to the stated amount multiplied by the lowest graduated tax rate, regardless of the taxpayer’s tax bracket.

Answer 24

Tax Credit

Question 25

This amount is calculated on the Income Tax and Benefit Return based on the taxable income amount. Progressive tax rates apply, so that higher income amounts are taxed at a higher rate

Answer 25

net federal tax

Question 26

This is income from all taxable sources minus allowable tax deductions.

Answer 26

net income

Question 27

This is income from all taxable sources.

Answer 27

Total Income

Question 28

A disability due to injury or illness that prevents an employee from working at his or her job for an extended, indeterminate period, the length of which is specific to each employer and insurer.

Answer 28

long-term disability

Question 29

How many years back can you apply capital losses against capital gains? They can also be carried forward for how long?

Answer 29

Three Years

Indefinitely

Question 30

If the moving costs are not reimbursed, the employee can deduct moving expenses provided that certain conditions are met, such as the following two requirements:

Answer 30

1. The employee’s old residence and new residence must both be in Canada
2. The new residence must be at least 40 kilometers closer to the new work location than the former residence.

Question 31

These plans protect employees against loss of income in the event of disability through sickness or injury.

Answer 31

Salary continuance plans such as Short-term and Long-term disability

Question 32

Some employees attempt to avoid paying tax on employment income by having some of their pay held back and paid later.

Answer 32

deferred compensation

Question 33

Deferred bonuses must be paid within

Answer 33

three years

Question 34

What should be the focus of financial planning with regard to taxation?

Answer 34

After-tax income maximization.

Question 35

What is the standby charge for a company car owned by an employer and made available for an employee’s personal use?

Answer 35

2% of the original cost of the car for each month it is available.