Tax

Question 1

Basic differences between NI and NIFTP

Answer 1

Permanent differences: dividends from Canadian corp, 50% capital gain, golf memberships, 50% meals&ent, political contributions, interest and penalties on tax.

Everything else temporary. Expensed as incurred: leases, ARO, lawsuits, warranty, development costs, severance, pension

Question 2

Carryforwards

Carrybacks

Answer 2

•	Capital loss
o	Carryback 3 years
o	Carry forward indefinitely 
•	Non-capital loss
o	Carryback 3 years
o	Carryforward 20 years 
•	ABIL loss
o	Carryback 3 years
o	Carryforward 10 years, then converts to capital loss 
•	Donations – Carry forward 5 years

Question 3

Sales Tax -Disputing an assessment

Answer 3

Disputing an assessment
• File a notice of objection within 90 days, if the appeal is dismissed or no decision is received in 90 days you can appeal to tax court of Canada. If not successful there can also appeal to federal court Canada.
• Interest and penalties are not deductible for tax purposes
• Recommend that we may not have the assessments cancelled completely, but there is a possibility that the assessments and interest could be reduced. A well thought out litter explaining all facts and any additional documents or receipts to include.

Question 4

CRA criteria for capitalizing costs

Answer 4

To the CRA costs are not capital in nature if:
• They do not provide a lasting benefit
• They do not maintain or improve the property
• They are not part of the property or a separate asset

Question 5

Main tax deductions and their rules

Answer 5

• Charitable donations – Actual donation receipts from the charity showing the registration number of the charity on it. Bank statements or some other proof of payment
• Child care expenses: Birth certificates showing the date of birth of the child. Copies of receipts from the daycare showing the business number or SIN. Cancelled cheques showing proof of payment
• Lower income gets the medical expenses and the childcare expenses
• If one spouse is self-employed, both can submit tax returns on June 15th, however any taxes due on April 30th

Question 6

Steps to calculate personal tax

Answer 6

Salary
Taxable benefits
Self-employment income 
Interest income
Non-eligible dividends
Taxable capital gains
Total
Less
Child care expenses
RPP contributions
RRSP deduction
=Net Income
Less net capital loss CF
=Taxable Income

Calculate federal tax owing before tax credits (tax brackets)
Less Federal tax credits
Basic personal
Child
CPP
EI
Canada employment
Medical expenses – lessor of 2352 or 3% net income
X all credits by 15%
Less donations $200 @ 15%, 29%
Less Political tax credit (1K total, 75% of first $400, 50% of next $300, 33.3% of remaining $250.
Less dividend tax credit on ineligible dividends
= Total credits
Total federal taxes less credits, less tax held at source, less instalments