Tax Elective 10 Flashcards
Starting in 2016, Testamentary trust will be able to exist for how long?
3 years
If a non resident sells shares, what are the tax implications?
Must apply for section 116 certificate and pay tax on gains within 10 days.
For a non resident, what are the tax implications on receiving rental income, dividend income, pension income and RRSP withdrawals?
25% withholding tax
Mind and management determines corporate residency, and what other factor?
Being incorporated in Canada after 1965
What is the tax cost of properties when becoming a resident?
FMV
What are the tax implications of becoming a non resident?
Deemed disposition (except on real property, pensions, and business assets; they will have witholding tax when finally disposed.)
How do we deal with non monetary transactions?
Split into 2 monetary transactions.
Foreign exchange rate on a particular transaction is from when?
Day of transaction
Foreign exchange on yearly revenues and expenses is what?
Average exchange rate.
Computer software is what class?
12 (with half net rule)
Exceptions to half net rule?
Class 14 and Class 12 Tools
Manufacturing equipment can be elected to be put into which class? & why?
Class 29 - 50% straight line (with half net rule)
CEC has a lifetime of?
indefintely
What happens if CEC is positive at the end of a businesses life?
Terminal Loss
Other than interest, the legal, accounting, banking, and share issuing expenses RELATED TO FINANCING are treated how?
1/5 deduction allowed per year
Other than interest, the legal, accounting, banking, and share issuing expenses RELATED TO BUYING CAPITAL are treated how?
Added to ACB
Class 1 building get into seperate classes how?
Through an election.
Recapture on Goodwill is how much?
It is a 1/2 ‘Economic Gain’ (so business income)
When does a taxable operating benefit apply for automobiles?
When employer pays for gas and maintenance.
Standby charge - maximum vehicle value and lease amounts are?
Actual price.
If stock options are not in the money and the deal is at arms length, what happens?
Employee can claim deduction (IT 111(1)(d) from taxable income of 1/2 the income inclusion.
What are the two reasons an employee could take the 1/2 division C deduction 110.1.d on stock options?
Not in the money when granted OR holds on to the shares for 2 years.
If an employee loan is used to purchase a dwelling, which prescribed rate is used? (each quarterly rate or rate at beginning?)
Whichever is lower.
Tax implications of parking paid by employer.
Taxable benefit.
What amount is repaid each year under the HBP?
Minimum 1/15
What year must an employee have worked with their employer to be able to transfer some of it to an RRSP?
Prior to 1996
What is the max govt grant per year for RESPs? (on what amount?)
$500 (20% on 2,500)
What is the maximum contribution amount to RESPS and age?
$50000 and 17
How much can be set aside in an RDSP?
Up to $200,000
Employees who are not commissioned salespersons cannot deduct (on home office)
Mortgage interest, property tax, or insurance.
Commissioned salespersons cannot deduct (on home office)
Mortgage interest
Child care ages are:
1-6 and 7-16
Child care expense is limited to?
2/3 of lowest spouses EARNED income
Child care expenses are limited to how much per week?
$200
Moving expenses are limited to?
Income from new location (but deductible in future years)
Home Accessibility Tax Credit is?
on $10,000 of eligible expenses (65 and older or disabled)
The interest on late payments to CRA is equal to:
prescribed interest rate plus 4%
What happens with rental property (CCA wise) costing more than $50,000?
Put in seperate class.
What are the home office implications for property (rental) income?
No home office can be claimed.
What are the CEC implications for propety (rental) incom
None can be claimed.
What adds to GRIP
72% on full rate taxable income and receiving eligible dividends from another company
Shareholder loans must be included in income unless:
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.
If a shareholder loan is included in income, how can one get a deduction?
by paying it back.
If a loan doesn’t have to be included in income, what are the tax implications?
A low interest taxable benefit will have to be included.
Reserve formula:
Lesser of 4/5 of gain in year 1, 3/5 year 2,etc OR proceeds to be received/total proceeds x capital gain.
When does the reserve formula double? (in years)
sale of small business shares to a child
Formula for Principal Residence exemption
(1 + number of years designated)/ total years of ownership x capital gain
When a principal residence is rented out, how much does the exemption extend by?
4 years
For PUP the minimum POD and ACB is always:
$1000
QSBC - Test 1 of 3
90% or more of FMV of assets used in an active business or invested in shares of connected SBC
QSBC - Test 2 of 3
Only the shareholder has held the shares in the last 24 months.
QSBC - Test 3 of 3
50% of the fmv of assets were used in an active business in the last 24 months.
How does one start to purify a co?
Pay down debt or pay a dividend
How does an ABIL and CNIL affect the capital gains lifetime exemption?
Reduces it.
What is the modified basic asset test for QSBC
Parent and Subsidiary - ONE of them must meet 90% test and other a %50 test.
In what two ways is property income active income?
More than 5 FULL time employees or if associated company can deduct the rent when computing their active business income.
SBD will increase to what by 2019
19%
Implications of spouse withdrawing spousal RRSPs within two years?
Attribution
Who gets dividend refunds?
CCPCs only.
Who has access to CDAs?
Private corps only.
Deemed dividend formula on redemption of shares
POD - PUC = deemed dividend
