Tax Elective 3 Flashcards
What should you do before a sale of shares?
Pay out CDA and RDTOH
Benefit of Share sale or Asset sale? Goodwill
Asset
Benefit of Share sale or Asset sale? LCGE on shares
Share
Benefit of Share sale or Asset sale? Carry forwards
Share
Benefit of Share sale or Asset sale? No Real Est. Taxes
Share
Benefit of Share sale or Asset sale? CG - 1/2 taxable
Share
Benefit of Share sale or Asset sale? Bump Asset Values
Asset
Benefit of Share sale or Asset sale? No reassess.
Asset
Benefit of Share sale or Asset sale? Seller gets losses on assets
Asset
Where can infor on Qualified farming property be found?
T4003 Farming Income
CNIL is calculated as
accumulated investment expenses that have
exceeded investment income
How much does the RRSP limit increase on earned income?
18%
What is the maximum RRSP contribution for 2015?
24 930
Why mix dividends and salaries?
To cover personal tax credits.
What are four good reasons to incorporate?
Limited Liability - Tax Reduction
- Tax Deferral - Income Splitting - LCGE - Type of Income - Estate Planning
Who does splitting income not work with?
Children
How should one transfer assets to a related party?
As a gift or at fair market value.
Why should assets be transferred at FMV to a related party?
To avoid double taxation.
What are the POD and ACB of a gift?
Fair Market Value
What is the inclusion rate on CEC expenditures?
75 percent
What is the allowed deduction for CEC?
7 percent per year of balance
What is the implication of corps being related?
Transactions are non arms length.
What is the implication of individuals and corps being affiliated?
Capital losses are denied (ACB is added to FMV) on transfers
What is the implication of corps being affiliated?
Capital losses are denied until disposition occurs by tranferee
What are the terminal loss implications when parties are affiliated?
Terminal loss is on hold until disposition to non-affiliated party.
Taxable Capital is:
Retained earnings + long term debt + share capital + overdraft
What is a personal service business?
Salary or wages earned by a corporation.
When is SPECIFIED INVESTMENT BUSINESS active income?
Employs MORE than 5 full time employees (or the work of that
many people is contracted out)
Is personal service business active or passive income?
Passive.
When does the SBD get reduced?
When taxable capital is greater than $10,000,000
What qualifies small business shares?
1- Held for 24 months 2- 90% of assets used in active business
(50% in last 24 mos.)
What is eligible for the capital gains exemption?
QSBS & Qualified Farm & Fishing Property
ABIL stands for
Allowable Business Investment loss
A business investment loss is from:
Arms length disposition of Sbshares or owed debt
ABIL can reduce which type of income?
All
ABIL is what percentage of BIL ?
50%
Carry forward after 2003 for an ABIL is?
10 years
What happens after an ABIL loss expires?
Turned to a net capital loss and carried forward indefinitely.
What part of the year must a CCPC be a CCPC to get the SBD?
Throughout the year.
How many levels of relations are considered related?
Immediate and in-laws.
What happens to the connecting corp if it opts out of the triangle association?
It loses its right to a SBD
Implications of related vs. associated?
Arms length vs. SBD sharing
Election for Canadian Securities
Elect dispositions to be treated as capital loss (all in that year)
Prescribed Auto Rate
55 for first 5000 and 49 after
Corp Tax Treatment: Auto above prescr rate?
Added back
Corp Tax Treatment: Prepaid expenses
for next years Services added back
Corp Tax Treatment: Club dues & rec facilities
Added back
Corp Tax Treatment: Bonuses not paid
Added back if not paid after 180 days
Corp Tax Treatment: Contingencies
Added back (eg Warranty & lawsuits)
Corp Tax Treatment: Foreign media directed at CDNs
Added back
Corp Tax Treatment: Life Insurance not as financing collateral
Added back
Corp Tax Treatment: Bad Debt
Direct write off only
Corp Tax Treatment: Legal and issue cost of shares
1/5 can be deducted
Corp Tax Treatment: Unrealized or impairment losses
non deductible
Corp Tax Treatment: Vacant Land
Interest & property taxes only up to Revenue
Corp Tax Treatment: Conventions
Up to 2 per year (usually)
Reserve: Includes what two items
Property & Lengthy (instalment) receivables
Does the UCC balance ever expire?
No
Lower of cost and proceeds applies to what?
CCA
Which classes does the 1/2 yr rule not apply to?
Class 14 & 52 & Some 12
What is class 12?
Tools, utensils, and kitchen items.
What is class 14?
Franchise fees, license and patents.
Class & Rate: Equipment & Furniture
8 - 20%
Class & Rate: Residential Buildings
1 - 4% (separate classes for rentals over 50,000)
Class & Rate: Commercial Buildings
1 - 10%
Class & Rate: Passenger vehicle
10 - 30%
Class & Rate: Non passenger vehicle
10 - 30%
Class & Rate: Vehicles over 30k
10.1 - 30% (No TL or Recap | 50% CCA final year |Sep Classes)
Class & Rate: Leasehold Improvements
13 - Straight Line over Lease + 1st Renewal
Class & Rate: Franchise Fees
14 - Straight line DAYS of useful life
Class & Rate: Parking Lot
17 - 8%
Class 29 & 43?
Manufacturing Equipments (30 - 50%)
Section 85 - What if an asset’s fmv is less than its tax value
then just sell it to the corp at fmv and get the loss.
