Taxes

Question 1

Child care expenses

Answer 1

Normally the lower income person would claim childcare expenses. An exception is if that person is in school part time. Higher income spouse can claim
$275 per month for a child with DTC
$200 per month for children under the age of 7
$125 per month for other eligible children

Question 2

AMT

Answer 2

Alternative min tax

To ensure high income low tax individuals pay a min amount of tax

$40,000 exemption in calculating taxable income under AMT. Calculated as adjusted taxable income in excess of $40,000 at the lowest federal tax rate of 15% with credits allowed for certain personal amounts) plus the applicable provincial tax tax.

Taxpayer must pay the higher of either the regular income tax or the AMT

Question 3

Calculate fed tax

Answer 3

Calculate taxable income including employment, interest income, taxable cap gains, etc

Gains from small business. FMV-ACB-LCGE = gain?

Apply the tax rates based on the tax brackets provided

Question 4

How many tax years can AMT be recovered following the year it is paid?

Answer 4

The following 7 years if there is taxable income

Question 5

AMT - final return?

Answer 5

AMT does not apply to year of death

Question 6

Filing deadline for deceased?

Answer 6

Death Jan 1-Oct 31 : April 30

Death Nov 1-Dec 31: 6 months after date of death

Question 7

Regular filing deadlines

Answer 7

Employees : April 30 and any balance owing paid by this date

Self Employed: June 15 but any balance owing should be paid by April 30

Question 8

Tax installment schedule

Answer 8

Calendar quarterly -= Mar 15, June 15, Sept 15 and Dec 15

Question 9

Filing deadline penalties

Answer 9

Late fee of 5% plus interest at prescribed rate

Question 10

What is a tax deduction?

Answer 10

An expense subtracted from total income to arrive at taxable income. Examples : medical, child care, union dues, investment counselling fees, alimony, spousal support, attendant fees

Question 11

Types of income

Answer 11

employment

business (self employed, sole proprietors)

Rental income

Investment income

Question 12

What is a tax credit?

Answer 12

Dollar for dollar reduction in the amount of tax that must be paid

Question 13

What is a non refundable tax credit?

Answer 13

Can only be used to reduce federal or provincial/territorial taxes payable to zero.

Fed credit is determined by x a gross dollar amount o by the lowest fed tax rate 15%

examples: basic personal, spousal credit, age credit, disability credit, caregiver credit, tuition fee and education credits, charitable donation, public transit, CPP, EI premium credit, medical expense credit

Question 14

PRE prior to 1982

Answer 14

A taxpayer and spouse could each designate one home their PRE and claim a deduction

Question 15

What is TOSI?

Answer 15

Tax on split income. Applies the highest marginal rate of 33% to split income of individuals under 18 years old

Question 16

New TOSI rules?

Answer 16

Relate to individuals over the age of 17 with respect to income derived from related business

Question 17

New TOSI exceptions?

Answer 17

The business owner/major shareholder is over 65 years old allows them to income split in retirement with their spouse without TOSI applying

18 or older and engaged on a regular continuous and substantial basis in the activities of the business

Individuals who are 25 or older who own 10% of the votes

Question 18

TOSI 18-24

Answer 18

Not subject to the TOSI rules : when taxable cap gains from disposition qualify for the LCGE, qualified farm, fishing propoperty or small business corproation

Question 19

Qualifying Small Business?

Answer 19

Actively operating primarily in Canada

CCPC

at least 24 months

More than 50% of FMV shares are using principally in the active business - at the time of sale increases to 90%

Question 20

What is the capital dividend account?

Answer 20

notional account representing cumulative value of non taxable portions of various forms of income

examples: insurance proceeds, tax exempt portion of cap gain, dividends from other CAD corps

Private corp can pay shareholders a dividend to its shareholder. Shareholder receive payment tax free

Question 21

LCGE 2021?

Answer 21

$892,218

Question 22

3 strategies to claim capital loss for superficial loss rules

Answer 22

repurchase the same security after 30 days of settlement of the original sale

ensure you don’t own the same security on the 30th day following settlement

sell the share of one company and purchase shares in a different company in with similar exposure to the markets

Question 23

3 exceptions to the superficial loss rules

Answer 23

deemed to have sold because you are no longer a resident of Canada

You are considered to have sold the property because you have changed its use

The property is deemed to have been sold because the owner died

Question 24

Car mileage

Answer 24

$0.59/km for first 5000

$0.53/km for upwards

Question 25

Standby charge when car is owned

Answer 25

2% of cost of car x # of months available to employee

Question 26

Standby charge when car is leased by company

Answer 26

2/3 monthly car lease ex insurance x # of months available to employee

Question 27

When can the standby charge be reduced?

Answer 27

total km driven by employee for work is over 50%
AND
total km for personal is less than 20,004

Question 28

What is the standby charge?

Answer 28

taxable benefit = standby charge + operating cost less any reimbursement by employee within 45 days after the end of the year