Tax Elective 10

Question 1

Starting in 2016, Testamentary trust will be able to exist for how long?

Answer 1

3 years

Question 2

If a non resident sells shares, what are the tax implications?

Answer 2

Must apply for section 116 certificate and pay tax on gains within 10 days.

Question 3

For a non resident, what are the tax implications on receiving rental income, dividend income, pension income and RRSP withdrawals?

Answer 3

25% withholding tax

Question 4

Mind and management determines corporate residency, and what other factor?

Answer 4

Being incorporated in Canada after 1965

Question 5

What is the tax cost of properties when becoming a resident?

Answer 5

FMV

Question 6

What are the tax implications of becoming a non resident?

Answer 6

Deemed disposition (except on real property, pensions, and business assets; they will have witholding tax when finally disposed.)

Question 7

How do we deal with non monetary transactions?

Answer 7

Split into 2 monetary transactions.

Question 8

Foreign exchange rate on a particular transaction is from when?

Answer 8

Day of transaction

Question 9

Foreign exchange on yearly revenues and expenses is what?

Answer 9

Average exchange rate.

Question 10

Computer software is what class?

Answer 10

12 (with half net rule)

Question 11

Exceptions to half net rule?

Answer 11

Class 14 and Class 12 Tools

Question 12

Manufacturing equipment can be elected to be put into which class? & why?

Answer 12

Class 29 - 50% straight line (with half net rule)

Question 13

CEC has a lifetime of?

Answer 13

indefintely

Question 14

What happens if CEC is positive at the end of a businesses life?

Answer 14

Terminal Loss

Question 15

Other than interest, the legal, accounting, banking, and share issuing expenses RELATED TO FINANCING are treated how?

Answer 15

1/5 deduction allowed per year

Question 16

Other than interest, the legal, accounting, banking, and share issuing expenses RELATED TO BUYING CAPITAL are treated how?

Answer 16

Added to ACB

Question 17

Class 1 building get into seperate classes how?

Answer 17

Through an election.

Question 18

Recapture on Goodwill is how much?

Answer 18

It is a 1/2 ‘Economic Gain’ (so business income)

Question 19

When does a taxable operating benefit apply for automobiles?

Answer 19

When employer pays for gas and maintenance.

Question 20

Standby charge - maximum vehicle value and lease amounts are?

Answer 20

Actual price.

Question 21

If stock options are not in the money and the deal is at arms length, what happens?

Answer 21

Employee can claim deduction (IT 111(1)(d) from taxable income of 1/2 the income inclusion.

Question 22

What are the two reasons an employee could take the 1/2 division C deduction 110.1.d on stock options?

Answer 22

Not in the money when granted OR holds on to the shares for 2 years.

Question 23

If an employee loan is used to purchase a dwelling, which prescribed rate is used? (each quarterly rate or rate at beginning?)

Answer 23

Whichever is lower.

Question 24

Tax implications of parking paid by employer.

Answer 24

Taxable benefit.

Question 25

What amount is repaid each year under the HBP?

Answer 25

Minimum 1/15

Question 26

What year must an employee have worked with their employer to be able to transfer some of it to an RRSP?

Answer 26

Prior to 1996

Question 27

What is the max govt grant per year for RESPs? (on what amount?)

Answer 27

$500 (20% on 2,500)

Question 28

What is the maximum contribution amount to RESPS and age?

Answer 28

$50000 and 17

Question 29

How much can be set aside in an RDSP?

Answer 29

Up to $200,000

Question 30

Employees who are not commissioned salespersons cannot deduct (on home office)

Answer 30

Mortgage interest, property tax, or insurance.

Question 31

Commissioned salespersons cannot deduct (on home office)

Answer 31

Mortgage interest

Question 32

Child care ages are:

Answer 32

1-6 and 7-16

Question 33

Child care expense is limited to?

Answer 33

2/3 of lowest spouses EARNED income

Question 34

Child care expenses are limited to how much per week?

Answer 34

$200

Question 35

Moving expenses are limited to?

Answer 35

Income from new location (but deductible in future years)

Question 36

Home Accessibility Tax Credit is?

Answer 36

on $10,000 of eligible expenses (65 and older or disabled)

Question 37

The interest on late payments to CRA is equal to:

Answer 37

prescribed interest rate plus 4%

Question 38

What happens with rental property (CCA wise) costing more than $50,000?

Answer 38

Put in seperate class.

Question 39

What are the home office implications for property (rental) income?

Answer 39

No home office can be claimed.

Question 40

What are the CEC implications for propety (rental) incom

Answer 40

None can be claimed.

Question 41

What adds to GRIP

Answer 41

72% on full rate taxable income and receiving eligible dividends from another company

Question 42

Shareholder loans must be included in income unless:

Answer 42

Paid back under 1 year OR the loan is received because they are an EMPLOYEE and bona fide arrangements are made to repay it. (not by virtue of being a shareholder) AND, if they are a > 10% shareholder, it is used to buy a dwelling, auto for work, or shares in the company.

Question 43

If a shareholder loan is included in income, how can one get a deduction?

Answer 43

by paying it back.

Question 44

If a loan doesn't have to be included in income, what are the tax implications?

Answer 44

A low interest taxable benefit will have to be included.

Question 45

Reserve formula:

Answer 45

Lesser of 4/5 of gain in year 1, 3/5 year 2,etc OR proceeds to be received/total proceeds x capital gain.

Question 46

When does the reserve formula double? (in years)

Answer 46

sale of small business shares to a child

Question 47

Formula for Principal Residence exemption

Answer 47

(1 + number of years designated)/ total years of ownership x capital gain

Question 48

When a principal residence is rented out, how much does the exemption extend by?

Answer 48

4 years

Question 49

For PUP the minimum POD and ACB is always:

Answer 49

$1000

Question 50

QSBC - Test 1 of 3

Answer 50

90% or more of FMV of assets used in an active business or invested in shares of connected SBC

Question 51

QSBC - Test 2 of 3

Answer 51

Only the shareholder has held the shares in the last 24 months.

Question 52

QSBC - Test 3 of 3

Answer 52

50% of the fmv of assets were used in an active business in the last 24 months.

Question 53

How does one start to purify a co?

Answer 53

Pay down debt or pay a dividend

Question 54

How does an ABIL and CNIL affect the capital gains lifetime exemption?

Answer 54

Reduces it.

Question 55

What is the modified basic asset test for QSBC

Answer 55

Parent and Subsidiary - ONE of them must meet 90% test and other a %50 test.

Question 56

In what two ways is property income active income?

Answer 56

More than 5 FULL time employees or if associated company can deduct the rent when computing their active business income.

Question 57

SBD will increase to what by 2019

Answer 57

19%

Question 58

Implications of spouse withdrawing spousal RRSPs within two years?

Answer 58

Attribution

Question 59

Who gets dividend refunds?

Answer 59

CCPCs only.

Question 60

Who has access to CDAs?

Answer 60

Private corps only.

Question 61

Deemed dividend formula on redemption of shares

Answer 61

POD - PUC = deemed dividend