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Accounting > Tax Elective 10 > Flashcards

Tax Elective 10 Flashcards

1
Q

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

A

3 years

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2
Q

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

A

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

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3
Q

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

A

25% withholding tax

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4
Q

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

A

Being incorporated in Canada after 1965

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5
Q

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

A

FMV

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6
Q

What are the tax implications of becoming a non resident?

A

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

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7
Q

How do we deal with non monetary transactions?

A

Split into 2 monetary transactions.

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8
Q

Foreign exchange rate on a particular transaction is from when?

A

Day of transaction

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9
Q

Foreign exchange on yearly revenues and expenses is what?

A

Average exchange rate.

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10
Q

Computer software is what class?

A

12 (with half net rule)

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11
Q

Exceptions to half net rule?

A

Class 14 and Class 12 Tools

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12
Q

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

A

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

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13
Q

CEC has a lifetime of?

A

indefintely

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14
Q

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

A

Terminal Loss

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15
Q

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

A

1/5 deduction allowed per year

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16
Q

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

A

Added to ACB

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17
Q

Class 1 building get into seperate classes how?

A

Through an election.

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18
Q

Recapture on Goodwill is how much?

A

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

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19
Q

When does a taxable operating benefit apply for automobiles?

A

When employer pays for gas and maintenance.

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20
Q

Standby charge - maximum vehicle value and lease amounts are?

A

Actual price.

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21
Q

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

A

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

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22
Q

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

A

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

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23
Q

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

A

Whichever is lower.

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24
Q

Tax implications of parking paid by employer.

A

Taxable benefit.

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25
Q

What amount is repaid each year under the HBP?

A

Minimum 1/15

26
Q

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

A

Prior to 1996

27
Q

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

A

$500 (20% on 2,500)

28
Q

What is the maximum contribution amount to RESPS and age?

A

$50000 and 17

29
Q

How much can be set aside in an RDSP?

A

Up to $200,000

30
Q

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

A

Mortgage interest, property tax, or insurance.

31
Q

Commissioned salespersons cannot deduct (on home office)

A

Mortgage interest

32
Q

Child care ages are:

A

1-6 and 7-16

33
Q

Child care expense is limited to?

A

2/3 of lowest spouses EARNED income

34
Q

Child care expenses are limited to how much per week?

A

$200

35
Q

Moving expenses are limited to?

A

Income from new location (but deductible in future years)

36
Q

Home Accessibility Tax Credit is?

A

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

37
Q

The interest on late payments to CRA is equal to:

A

prescribed interest rate plus 4%

38
Q

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

A

Put in seperate class.

39
Q

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

A

No home office can be claimed.

40
Q

What are the CEC implications for propety (rental) incom

A

None can be claimed.

41
Q

What adds to GRIP

A

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

42
Q

Shareholder loans must be included in income unless:

A

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.

43
Q

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

A

by paying it back.

44
Q

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

A

A low interest taxable benefit will have to be included.

45
Q

Reserve formula:

A

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

46
Q

When does the reserve formula double? (in years)

A

sale of small business shares to a child

47
Q

Formula for Principal Residence exemption

A

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

48
Q

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

A

4 years

49
Q

For PUP the minimum POD and ACB is always:

A

$1000

50
Q

QSBC - Test 1 of 3

A

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

51
Q

QSBC - Test 2 of 3

A

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

52
Q

QSBC - Test 3 of 3

A

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

53
Q

How does one start to purify a co?

A

Pay down debt or pay a dividend

54
Q

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

A

Reduces it.

55
Q

What is the modified basic asset test for QSBC

A

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

56
Q

In what two ways is property income active income?

A

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

57
Q

SBD will increase to what by 2019

A

19%

58
Q

Implications of spouse withdrawing spousal RRSPs within two years?

A

Attribution

59
Q

Who gets dividend refunds?

A

CCPCs only.

60
Q

Who has access to CDAs?

A

Private corps only.

61
Q

Deemed dividend formula on redemption of shares

A

POD - PUC = deemed dividend

Accounting (14 decks)

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