Tax Flashcards

Question

CCA Class for Intangible Capital Assets that are not included in Class 14 i.e Goodwill/customer lists/trademarks/licenses

Answer 1

Short Tax Year - CCA claim must be prorated for all classes except 14 CCA may not be claimed until it is Available For Use - Considered AFU at earlier of: - Time it is first used - second taxation yr following year of acquisition ## Footnote Buildings are considered AFU when 90% or more of the building is used for its purpose

Answer 2

Contributions to RRSP,RRP,RRIF CPP Contributions on self-employed persons self employed must contribute personal & employer amts EI and OAD Overpayments Moving Expenses: 1. Enabled TP to carry on business 2. at last 40kms closer 3. ordinarily resided before and post relocation - Travelling costs up to 15 days (meals + lodging), transport/storage costs, selling costs of old res, lease cancellation of old res. Workplace in home: Employee can deduct utilities + maintenance but no property taxes or mortgage interest only contractors can deduct mtg. Expenses must be prorated for sqft. Childcare Expenses - Amount paid Limited to: $8,000 for child under 7, $5,000 for child 7 - 16

Answer 3

LCGE Net Capital Losses Non Capital Losses Employee Stock options ABIL

Answer 4

Basic personal Amt Employment Amt Old Age amt CPP & EI Donations DTC: Eligible = (6/11 x gross up) Non-eligible = (9/13 x gross up) Medical Expense - Amt paid LESS LESSER OF: 1. 3% NI 2. $2,635 Childcare - 2 TP cannot claim for same child

Answer 5

General Rule: Purchaser prefers purchase of assets, vendor prefers sale of shares Purchaser (Assets): - Can pick and choose which assets to purchase (avoid low CCA assets) - Not liable for liabilities - Doesnt inherit tax history Seller (Assets): - Can reult in CG - Can be left with assets that are hard to sell - Liable for liabilities - Can't use LCGE Purchaser (Shares): - Inherit tax history - Can't pick assets - No asset bump-up Vendor (Shares): - Won't be left with hard to sell assets - liabilities stay with the corp/purchasing entity - LCGE if QSBC - Simple tax consequences

Answer 6

1. Control exists when over 50% of votes to elect BOD are held 2. Determine YE - Acquired corp is deemed YE immediately before acquisition. If deemed YE is not the same as fiscal YE, there will be 2 taxation years in that fiscal year 3. Consequences: - Two tax returns will have to be filed - CCA & SBD will be prorated for short year - Automatic recognition of pre-AOC losses at deemed YE

Answer 7

Advantages of Incorporation: 1. Tax Reduction - If personal tax rate is higher than corporate, there will be an advantage to incorporate 2. Tax Deferral - shareholder/manager can time dividend pmts according to his/her personal needs (If personal rate is higher than the corps, dividends can be delayed to defer taxes) 3. Income Splitting - Corporations can be used to split income among family members who are taxed at lower marginal rates Disadvantages: More Admin costs i.e. prep of financial statements, prep of tax returns, annual filing fee

Answer 8

Allows TP to be exempt from paying tax on all or a part of CG arising on disposal of PR - Must have been ordinarily inhabited. 1. For each property: ACB/Yrs owned 2. choose property with highest gain per year to maximize PRE 3. Total Gain x [(1 + years designated) / yrs owned]

Answer 9

1. Involuntary: property is stolen or destroyed - Didn't have to be used for business purposes - Replacement must be acquired for same purpose 2 . Voluntary: TP sells property used in business - Must have been used in business - Must be acquired within 12 months following end of TY OG prop was disposed in ## Footnote Max Deferral of CG is lesser of: - POD - Cost of Replacement prop

Answer 10

Intended to discourage employed individual from incorporating a company through which they would provide their services to a business that would normally be considered to be their employer. - PSBs are not elligible for SBD - PSBs are not elligible for GRR - PSBs are subject to additional federal rate of 5%

Answer 11

ACB of PUP is greater of original cost and $1,000 POD of PUP is greater of actual proceeds and $1,000 - Losses are denied - 50% of gains are taxed

Answer 12

Collectibles that tend to appreciate such as: Paintings, sculptures, coins, jewellery, rare books, stamps. ACB of LPP is greater of original cost and $1,000 POD of LPP is greater of actual proceeds and $1,000 - Can create a loss and be deducted from CGs - 50% of gains are taxable

Answer 13

-Reasonable Motor vehicle Allowances: - Not reasonable if not based solely on KM travelled - Not reasonable if amt exceeds CRA limit ($0.59 for first 5000 kms) - Employee recieved both allowance and reimbursement. - Reasonable travelling expenses - Mental/physical counselling - Discounts on Merch - Gifts under $500 - Cell phone and internet - Education and professional development (unless for personal interest)

Answer 14

- Group insurance - Parking - Reimbursement for employee owned phone - Monetary Awards - Event Tickets

Answer 15

Standby Charge - Employer owns vehicle: use < 50% employment purpose = 2% x C x months available OB = personal Km x rate. Reduction in Standby Charge - Employer owns vehicle: use > 50% employment purposes = standby charge x [Personal km / (1,667 x months available)] OB = Lesser of personal Kms x rate & 50% of standby charge.

Answer 16

Value of benefit is not deductible for corp regardless of whether it is repaid. Specified Employee: Owns more than 10% of shares - Must include loan in income unless repaid within 1 yr. If shareholder/employee owns LESS than 10% they could be exempt from income inclusion providing: 1. Bona Fide arrangements are made for repayment of the loan within a reasonable period. 2. The loan arises because of employee's employement and not because of shareholdings

Answer 17

NO BENEFIT ARISES ON GRANT DATE **Public Company:** Exercise date - Taxable Benefit = (FMV - exercise price) x number of shares granted Sale date - CG = 50% x shares sold x (Market price - FMV on exercise date) **CCPC:** Exercise Date - NO BENEFIT Sale Date - Taxable Benefit = (FMV - exercise price) x number of shares granted AND CG = 50% x shares sold x (Market price - FMV on exercise date)

Answer 18

- Anyone who sells taxable supplies in Canada, at the date where supply exceeded $30,000. - Previous 4 quarter test - Effective registration date no later than 1 month after losing SS status - 1 quarter test - Effective registration date is date of sale that made you exceed $30,000

Answer 19

- GST/HST must be charged - Election available if assets are substantially (90% or more) regarded as being necessary to carry on business and the purchaser will carry on that business. - Eliminates need for for seller to charge/remit GST/HST - Purchaser can claim ITC as long as assets are used for commercial activity

Answer 20

Based on place of supply Goods - where they are delivered Services - where customer is located, NOT where work is performed Real Property - where it is situated Intangibles - where they can be used

Answer 21

TS < $1,500,001: Report Annually, Deadline = 3 Months after reporting period. TS $1,500,001- $6M: Report Quarterly, Deadline 1 Month after reporting period. TS > $6M: Report Monthly, Deadline 1 month after reporting period

Answer 22

Required for annual filers whose GST/HST for PY is > $3,000 PY Method: 4 equal installments of 25% of net tax from PY. CY Method: 4 equal installments of 25% of estimated net tax owing for CY. Installments are payable within 1 month after end of each quarter.

Answer 23

A CCPC where more than 50% of FMV of assets were: - Used mainly in active business carried on in Canada - Throughout 24 moths preceeding sale of shares, no one else owned the shares

Answer 24

Eligible Gross-Up: 38% (i.e. 100 x 38% = $38, total included in income = $138) Eligible DTC: 6/11 x gross-up amt (i.e. 6/11 x $38 = $20.72 ) Non - eligible Gross up: 15% Non - eligible DTC: 9/13 x gross-up amt

Answer 25

Dividends: - Provide tax credits - Taxed at the corporate level first (integration) - Don't require CPP contributions Salary/Bonus: - Require CPP contributions - Lenders may require stable income

Answer 26

- Loses CCPC status - Loses SBD & QSBC - Deemed yr end immediately before goes public - Loss of capital dividend acct & RDTOH

Answer 27

Divs from non-connected @ 38.33% Divs from connected @ 100%

Tax Flashcards

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