Tax

Question 1

Tax avoidance legitimate in which cases?

Answer 1

1. Full utilization of allowable deductions
2. Conversion of non-deductible expenses into deductible expenses
3. Postponing receipt of income
4. Income splitting with family members
5. Selecting investments that provide better after tax returns

Question 2

Federal government collects provincial taxes except for?

Answer 2

Quebec - have their own taxes for indi and corp
Alberta - own taxes for corp

Question 3

Taxation year for indi and corp?

Answer 3

Indi - calendar year
Corp - choose any fiscal year and keep it consistent. Corp tax year cannot be longer than 53 weeks

Question 4

Which tax form is received for investment income generated by a mutual fund held outside registered account?

Answer 4

T3 or T5.
Reports the foreign income and canadian interest, dividends & cap gains, incl. divs that have been reinvested

Question 5

Which of the following are acceptable tax-deductible items related to investment income:
1. Interest paid on funds borrowed to earn interest and dividends
2. Interest paid on funds borrowed to earn capital gain only.
3. Brokerage commission paid to buy/sell securities.
4. Accounting fees paid for recording investment income

A. 1&2
B. 2&3
C. 3&4
D. 1&4

Answer 5

D. 1&4

Financial planning fees and safety deposit charges are not acceptable either

Question 6

Which of the following are acceptable tax-deductible items related to investment income:
1. Interest paid on funds borrowed to invest in RRSP, RDSP, TFSA or RESP
2. Admin, counselling & trustee fees for regular/self-directed RRSP OR RRIF
3. Fees for certain investment advice
4. Fees for mgt, admin and safe custody of investment

A. 1&2
B. 2&3
C. 3&4
D. 1&4

Answer 6

C. 3&4

Financial planning fees and safety deposit charges are not acceptable either

Question 7

Select all that are NOT taxed as income:
A. Employment income
B. Royalties received
C. Child support payments received
D. Workers compensation benefits

Answer 7

C & D

Question 8

RRSP proceeds passing to adult children is included in the deceased’s final tax return?

Answer 8

True. If these proceeds were passing to surviving spouse, minor or dependent children, then it would be passed directly.

Question 9

Leo, aged 70, contributed 20,000 to spousal RRSP last year and the year prior. His wife Anne turned 69 last year and transferred the spousal RRSP to RRIF at the end of the year. The total value of the RRIF was $100,000 as of Jan 1 of this year. If Anne withdraws 20,000 from her RRIF this year:
A. 4,762 will be taxable in Leo’s hands.
B. 4,762 will be taxable in anne’s hands
C. 20,000 will be taxable in leo’s hands
D. 20,000 will be taxable in anne’s hands

Answer 9

B.
Annual reqd min payment is 4,762 (100,000 divided by 21(90-69). Reqd payment will be taxed in anne’s hands while the remaining will be taxed in leo’s hands because of his recent contributions to spousal RRSP