Tax Planning

Question 1

Capital Dividend Account

Answer 1

Pays tax-free dividends

Question 2

Cumulative Net Investment Loss

Answer 2

• Prevents access to LCGE

- Can be offset by receiving eligible (38% gross up) or non-eligible (15% gross up)dividends

Question 3

General Rate Income Pool

Answer 3

• Can pay out eligible dividends

Question 4

Alternative Minimum Tax

Answer 4

• Arises when claiming LCGE, deductions or tax credits

- Can be carried forward to offset tax in future years

Question 5

Deduction for workspace in home (Self-Employed)

Answer 5

• 50% meals and entertainment
• professional dues
• work related travel
• work cell phone
• internet (business use)
• office supplies
• lease of computer/business equipment
• tax preparation fee
• home office expenses (based on size of space or # of rooms): mortgage interest, utilities, property taxes, repairs and maintenance, home insurance

Question 6

Deduction for workspace in home (Employee)

Answer 6

• professional dues

Question 7

Deduction for workspace in home (Commissioned Employee)

Answer 7

• home maintenance
• home insurance
• property tax
• rent

Question 8

How can executor use taxpayer’s RRSP room to reduce taxes on terminal tax return

Answer 8

if taxpayer has a spouse, can elect to make post-mortem contribution to spousal RRSP

Question 9

When is there a recapture of CCA

Answer 9

When sale price > UCC
cost - UCC = recapture of CCA
sale price - cost = capital gains

Question 10

When is there a terminal loss upon selling depreciable assets?

Answer 10

When sale price < UCC

sale price - UCC = terminal loss

Question 11

Marginal Tax Rate

Answer 11

• for next dollar of taxable income

- next dollar of allowable income tax deductions

Question 12

Effective Tax Rate

Answer 12

• applies to income or deductions you are considering

- used for investment returns

Question 13

Spousal Support lump sum payment for arrears taxable and deductible rules

Answer 13

• taxable to spouse

- tax deductible to payer

Question 14

Legal fees to establish right to child support tax deductible?

Answer 14

yes

Question 15

Tuition tax credits are refundable credits

Answer 15

false

Question 16

T or F Tuition tax credit be used by spouse to claim

Answer 16

true

Question 17

T or F Tuition tax credit be used by supporting parent to claim?

Answer 17

true

Question 18

T or F Tuition tax credit cannot be carried forward to future years

Answer 18

false

Question 19

Taxpayer can claim medical expenses for:

Answer 19

• taxpayer
• their spouse
• dependants including grandchildren
• relatives living in Canada that receive support

Question 20

Medical expenses can be claimed in which period?

Answer 20

any given 12 months period ending in the year that were not claimed in the prior year

Question 21

Medical expenses can be claimed if medical treatment received how far away?

Answer 21

• 40km, can claim cost of travel

- 80km, can claim meals and accommodation in addition

Question 22

2 methods to calculate medical expenses claimed (travel to receive treatment)

Answer 22

simple method (used prescribed rate)& detailed method

Question 23

Allowable Business Investment Loss carried forward and back?

Answer 23

• back 3 years forward 10 years

Question 24

ABIL can deduct income from

Answer 24

all sources

Question 25

What type of tax rate applies to ABIL

Answer 25

effective tax rate

Question 26

Child care tax deduction amounts

Answer 26

$8,000 for under age 7
$5,000 for ages 7 ~ 16
$11,000 for disabled (DTC)

Question 27

Effective Tax Rate formula

Answer 27

Total tax / taxable income

Question 28

How can executor apply taxpayer’s unused net capital losses carried forward in year of death?

Answer 28

can be claimed against any source of taxable income for the year of death and year preceding

Question 29

CNIL offset calculation for reducing surplus with non-eligible dividends

Answer 29

grossed up 15% amount must equal to CNIL amount

Question 30

How much CCA can you deduct in the first year?

Answer 30

50%

Question 31

CNIL is offset by after tax or before tax amount of non eligible dividends?

Answer 31

after tax