Taxation Flashcards
How are eligible dividends taxed?
Grossed up by 38%: this amount is reported as income
Tax credit of 15% of grossed up amount
(this equals 20.7% of actual dividend)
Benefit of life insurance contracts?
While funds withdrawn during your lifetime are taxable and there is no deduction on premiums, it provides tax sheltered/deferred growth and the death benefit is tax free.
Maximum charitable donations that can be claimed?
75% of net income. BUT you can claim amounts above this in any of the subsequent 5 years
LSVCC benefit?
No provincial credit; Fed credit of 15% on up to 5K purchase.
IPP (Individual Pension Plan)
Held for one individual and some times a spouse (or other family member).
* locked in
* defined benefit
* annual minimum payments
* now amounts paid above RSP cont room are taxable as benefits from employer.
* generally creditor proof
How are stock dividends (i.e., dividends paid in the form of additional shares) taxed?
Same as regular dividends
What are capital dividends and how are they taxed?
A distribution of the untaxed half of capital gains realized by corp. No tax is paid by shareholder.
Dividend sharing?
A spouse can elect to include the dividend income and tax credit on their return.
Are dividends from an insurance policy eligible (i.e., grossed up)?
NO
What is the impact of leaving a dividend on deposit in an insurance policy?
Decreases ACB
Selena’s income for the current year is made up of the following: $12,000 child support payments
as mandated by her recent separation agreement, $3,500 in royalties from a video game production,
$19,000 in employment income and $8,000 in workers’ compensation payments. What is Selena’s
taxable income?
22,500
* royalties and employment income only
How are S-RIF withdrawals taxed in contributions were made in previous 3 years?
Minimum payment is taxed by holder; excess taxed in spouses hands.
How are capital dividends taxed?
Not taxed (this is the untaxed half of a capital gain by a corporation)
What is tax avoidance?
Using tax system in a way which it was not intended
What is paying an unreasonable salary to a spouse to decrease tax to claim a business expense an example of?
Tax evasion
What is tax minimization?
Legal means to reduce taxes
Implications of attribution for gifts in TFSA?
Non, spouses can lend or gift funds to be invested in a TFSA without attribution worries
What fixed income instrument is taxed even if the maturity date/anniversary date does not fall in that year?
T Bills
How are gains on crypto taxed?
Capital gains (i.e., 50%)
Do you need to pay tax if using crypto to buy oods/services?
YES!
Does putting assets into an alter ego trust generate a tax event?
No
What is tax conversion?
being able to favourably report tax (e.g. deferral, deductions, cap gains)
Taxation of dividends from LSIF?
eligible
Federal tax credit for LSIF?
NONE! ended in 2017
how to calculate effective tax rate for dividends?
Gross up rate X (marginal rate -fed & prov conversion rates)
If you own a house and a cottage, which is primary residence?
You should state which ever one has the higher cap gains tax to be the personal residence (if cg/years of ownership is higher)
How much gain can be exempt under the principal residence exemption?
((years designated as prin residence + 1) X Cap gains) / years owned
Taxation if gifting primary residence to family?
None, because no cap gains on PR.
How does the personal residence exemption work?
((Years designated PR+1) x cap gains) / years owned
Can be split across properties, only restriction is that can only have 1 PR in a given year.
* for calculating years owned, only calendar yers are relevant (if bought in Dec 2021, it counts as a year)
* so, usually it makes sense to take full advantage on one property and if any excess, then apply it to a second property.
* PR is only declared at time of disposition.
AS A RULE OF THUMB: you get 1 excess year that can be used on another property.
Taxation RSP spousal designation on death?
If spouse or financial dependent child is bene, it is included in the spouse’s/child’s income.
