Tax Planning Flashcards
(200 cards)
1
Q
GST federal rate
A
5%
2
Q
what is HST
A
combined tax that includes the GST and PST
3
Q
excise tax
A
federal tax imposed on specific goods like gas,alcohol, tobacco to discourage consumption of these products
4
Q
what is property tax used to fund
A
things like police, fire department, public schools, local infrastructure
5
Q
what is effective marginal income tax rate
A
considers impact of phase outs of tax credits and benefits as income increases. more accurate than just the marginal tax rate
6
Q
tax avoidance
A
legally structuring things to pay as little tax as possible
7
Q
General Anti-Avoidance Rule (GAAR)
A
under the Canadian income tax act, under this rule CRA can challenge a tax strategy or structure even if technically it is legal, if it is not consistent with the intention or spirit of the tax law.
8
Q
when are you considered a separated spouse
A
legally married but living separate for 90 days due to breakdown of marriage
9
Q
when are you considered separated common law partners
A
in a common law relationship that has ended and the individuals live apart for 90 days
10
Q
self employed people’s tax return deadlines
A
file by June 15 but pay balances owing by April 30
11
Q
when are tax instalments due
A
15th of mar,jun,sept,dec
12
Q
what are the federal tax brackets as of 2025
A
- 15% on income up to $57,375.
- 20.5% on income over $57,375 up to $114,750.
- 26% on income over $114,750 up to $177,882.
- 29.32% on income over $177,882 up to $253,414.
- 33% on income over $253,414.
13
Q
2025 basic personal amount
A
$16,129 for people earning less than $177882 net income
14
Q
tax filing deadline for corporations
A
6 months after end of fiscal
15
Q
when can you file an objection or request for reassessment of tax return to CRA
A
within 90 days of getting your NOA
16
Q
what is CRA interest rate for outstanding income tax
A
10% calculated and compounded daily
17
Q
late filing penalty by CRA
A
5% of taxes owed, plus 1% of the balance owing for each full month the return is late up to a max of 12 months.
18
Q
tax filing requirements for non residents
A
non residents are taxed on their canadian sourced income, not worldwide income like residents are. Tax filing requirements are based on residency, including ties to Canada, and income source
19
Q
factual resident
A
someone who maintains significant residential ties to Canada while abroad. (IE is travelling but keeps a house and family connections in Canada)
20
Q
Deemed Resident
A
if you are in Canada for 183 days or more in a tax year and do not have significant residential ties with another country. Deemed residents are taxed on worldwide income
21
Q
taxation of spousal support payments
A
taxable for recipient, tax deductible for payor
22
Q
Salary Deferral Arrangement
A
allows employees to defer receipt of income to a future year. Includes deferring taxable benefit from stock options. CRA has rules and limits so that SDAs are not abused.
23
Q
is GIS taxable
A
no
24
Q
what is the pension credit amount
A
$2000
25
are scholarships taxable
no if you are enrolled in qualifying program
26
are research grants taxable
yes, but can also offset a lot of the grant by deducting related expenses
27
is teaching and research assistantships taxable
yes
28
is the cash method or accrual method usually used for reporting interest for individuals
Cash method- claim it as it is received, not when it is earned.
29
taxation of an annuity
part of the income from an annuity is considered ROC and not taxable. The rest is taxable
30
is disability tax credit refundable or non refundable
non refundable
31
how is CPP disability benefit taxed
as income
32
How are RDSP withdrawals taxed
growth and grants are taxed as income, principal is not.
33
How is EI sickness benefit taxed
as income
34
how is the Canada Child Benefit taxed
tax free
35
Taxation on first nations people
income earned by a registered Indian on a reserve is typically tax exempt and goods bought are gst exempt. Investment income is exempt if the investment asset is situated on a reserve
36
How are RRSP/RRIFs taxed on First Nations people
taxed as usual as the RRSPs are a federal program
37
how are OAS benefits taxed if received by Registered Indian
regular income as it is a federal program
38
what constitutes capital property
something intended for long term income or personal use is usually considered capital property. Frequent disposals of similar properties may indication the property is inventory, not capital property. If primary purpose is resale rather than income generation or personal use, it is classified by CRA as inventory
39
Non-depreciable capital property
personal use property (car, house, furniture where gains aren't taxable )
or listed personal property (subset of personal use property, includes items like stamps, art, jewelry. Gains taxable and losses are deductible but only against other LLP)
40
"other property"
property not included in personal use or listed personal property, like stocks and bonds
41
depreciable capital property
property that loses value over time. Taxpayers can claim Capital Cost Allowance to write off the cost over a period of years
42
Eligible cost property
not used anymore. Replaced by "Class 14.1 of depreciable property". Items like IP and goodwill
43
Undepreciable capital cost
For depreciable assets, the total cost of the property that has yet to be claimed as capital cost allowance
44
Inadequate consideration
when you give/sell property for less than FMV. Usually to family member.
45
attribution rules for inadequate consideration
if inadequate consideration is given, CRA may attribute the income or loss back to the transferor.
46
it is a deemed disposition when you transfer personal assets into a corporation
yes
47
are there taxes when you leave canada
yes, there is deemed disposition of some assets.
48
what is the market value or cost threshold to report dispositions in listed personal property
$1000
49
what is the rules for calculating capital gains on personal use property
if the ACB and selling expenses are less than $1,000 they are considered to be $1000 for the purpose of calculating gains.
50
what is recapture in relation to depreciable capital property?
applying any gains against any past depreciation claims. The recaptured amount is the amount that the market value or sale proceeds exceeds the amount of the Undepreciated Capital Cost. Recapture amount is added to taxpayers income for the year. If the sale price is less than the original cost but more than the UCC, it results in a recapture; if it is more than the original cost, the excess is treated as a capital gain. In either scenario, the taxpayer is required to adjust their tax obligations accordingly
51
how do you report the gain on a depreciable capital property
any gain is first recaptured (applies to past depreciation claims) then the remaining amount is treated as a capital gain
capital gain = Selling Price - (ACB + Accumulated Depreciation).
52
how far back can you carry capital losses back to offset gains
3 years
53
what is a non-capital loss
arises from business or property income that is less than expenses. Can offset regular income with these losses, unlike capital losses. an be carried back 3 years or forward up to 20 years
54
terminal loss
happens when a depreciable capital property (like equipment used in a business) is sold for less than its UCC. The terminal loss can be deducted from income.
55
how long can losses on LPP (listed personal property) be carried forward
7 years
56
What is the Cumulative Net Investment Loss (CNIL) for
Used to track the cumulative amount by which investment expenses exceed their investment income over time. Only useful for determining the Lifetime Capital Gains Exemption on sale of qualified small businesses shares or farm and fishing property. If not planning to use the LCGE, the CNIL is not relevant
57
What are the investment income and investment expenses in the CNIL calculation
investment income is interest, dividends, royalties, and net rental income.
investment expenses are interest on money borrowed to invest, investment fees, and other carrying charges
58
calculation of CNIL
investment income-investment expense each year, starting from 1988 or first year of Canadian residency.
59
what is the meaning of the CNIL
if the investment expenses exceed investment income in a year, the difference is added to the the CNIL balance. If the investment income exceeds expenses, the surplus reduces the CNIL
60
what is the CNIL impact on LCGE
A positive CNIL balance (meaning expenses exceed income) reduces LCGE amount which reduces the amount of tax free capital gains you can claim.
61
what is the amount of the LCGE
$1,250,000
62
Do small business dividends qualify for dividend tax credit?
not usually because the dividends usually come from business income that is not taxed at the high corporate rates.
63
how are capital dividends taxed by dividend recipient
tax free
64
how are foreign dividends taxed
as ordinary income
65
how does gross up of dividend income work
multiply the dividend received by 1.38%, this is what you include in your income for taxes.
Figure out what you would pay in tax on the grossed up amount if you paid marginal tax rate.
Then, multiply the tax credit (15.0198% federally) by the grossed up amount.
Then minus the tax credit from what you would pay if you paid at your marginal tax rate.
66
how are dividends from a trust taxed
taxed in hands of beneficiaries at their marginal tax rate. The income maintains it nature (type of income) when it is passed to beneficiaries, so the dividend might be eligible for dividend tax credit if it came from a canadian corp
67
what are non-eligible dividends
they are dividends from companies that are paying less than the highest corp tax rate and so the dividend tax credit is also lower
68
example of refundable tax credit
GST/HST credit, child benefit
69
federal tax deduction
RRSP CN, childcare expenses, Homebuyers plan, moving expenses, union and professional dues, student loan interest, employment expenses
70
when are moving expenses tax deductible
when you move over 40 km closer to a new place or work or education
71
Non refundable tax credit examples
Basic Personal Amount, Canada Caregiver Credit, disability tax credit, age amount, medical expense deduction, tuition tax credit, charitable tax credit, foreign tax credit
72
who can claim the age amount
people over 65+ at the end of the tax year. non-refundable tax credit. Only for low income people (earning less than approx $45k) and max amount to credit is $9028 in 2025
73
which tax credits are transferable to a spouse
age amount, pension income amount, disability amount, tuition/education/textbook amounts, Canada Caregiver Amount for Infirm Children Under 18.
These are all non-refundable tax credits so if you can't use them all, you can transfer the remaining amount to spouse/partner
74
Which two non-refundable tax credits can be transferred from a child to a parent
tuition tax credit (child must first use as much as possible of the credit to reduce their tax to $0 before transferring the rest of the credit to parent)
Education and Textbook amounts (phased out now, but can still use unused amounts)
75
when and what can you deduct from taxes if you work from home
portion of home related expenses like utilities, internet, rent. Must work from home 50% of the time or have a home office exclusively for meeting clients
76
what is the Canada Employment Amount
non-refundable tax credit to help with expenses like uniforms and supplies. All employees can claim this
77
what tax deductions and credits are available for seniors
age credit - non refundable for people 65+. Not eligible if income too high ($45kish)
pension income - non refundable $2k credit for people taking pensions or if 65+ and taking RRIF pmts
medical expenses
78
spouse or common law partner amount
non refundable tax credit for supporting spouse or common law. if income below certain level
79
Disability Supports Deduction
For employed or self-employed individuals with a disability, this
deduction covers certain expenses incurred to earn income or attend school. The individual
must have an impairment in physical or mental functions and incur expenses for attendant
care or other disability supports to earn employment income, carry on a business, or attend
an educational institution.
80
* Climate Action Tax Credit:
In provinces like British Columbia, this credit helps offset the
impact of carbon taxes on low- and middle-income earners
81
what do CRA assume about transactions between arms length people
transactions are done for business or commercial reasons and their dealings reflect normal commercial conditions
82
do attribution rules apply to spouses
yes, can include capital gains and income
83
do attribution rules apply to parent and adult child transfer
typically not
84
Do both partners have to be taking CPP to income split it
yes
85
federal tax on corporations
Corp tax in 2025 is 15%.
CCPC rate is 9% on first 500k of active business income
86
how does CRA determine the residency status of a corporation for income tax puroposes?
considers:
where central management and control is - where does board meet and makes strategic decisions.
Place of incorporation
Other things like location of HQ, residence of officers/directors etc., where it conducts day to day operations
87
when must corp taxes be paid
within two to three months after year end. Most corps are on installments which is good because the actual filing deadline is 6 months after year end.
88
what corporations are not required to file income tax in Canada
A corporation that was a registered charity throughout the year.
A corporation that, throughout the year, was exempt from tax under section 149 of the Income Tax Act (such as certain crown corporations, municipal corporations, or other entities).
Certain subsidiaries of crown corporations that meet specific requirements.
Other specific cases as outlined by the CRA.
89
what happens if a corp pays too much in income tax
CRA pays interest on the overpayment
90
how often does CRA change their interest rate for unpaid taxes
quarterly
91
what is the late filing fee for corp tax returns
5% of balance owing plus 1% of balance for each full month the return is late (up to a max of 12 months)
92
what is penalty fro corp putting false statements or omissions in their return
50% of understated tax or overstated credits relating to the false statement or omission
93
when is the filing deadline for trusts
90 days after the end of the taxation year which is calendar year, meaning usualy mar 31
94
what is the federal tax rate for trusts
it is the highest marginal tax rate, which is 33% as of 2025
95
what are trust tax rates provincially
usually highest tax rate, like federal tax
96
how is the residency of a trust known
it is on a case by case basis and not outlined in the Income Tax Act. Considers following factors:
Management and control location
Trustee residency
Place of Trust Creation
Bene Residencies
Court Decisions and Rulings
97
what form does a trust file for taxes
T3
98
what are late filing penalties for trusts
same as corporations: 5% of balance owing plus 1% per month it is late up to 12 minths
99
how is interest income claimed by corps and trusts
accrual basis so when it is earned not when it is paid
100
Interest income reporting fro a CCPC
investment income is taxed as corp income and is not subject to lower rates available for active business income
Interest income is not eligible for small business deduction
Part of the tax paid on investment income including interest is added to the corps RDTOH (Refundable Dividend Tax on Hand Account). WHen corp pays dividends, some RDTOH can be refunded to corp
101
interest income taxation in a Trust
if retained in the trust, taxed at highest rate. If paid to benes, taxed in their hands.
102
what is valuation day
dec 31 1971 which is the day capital gains taxes were introduced. Values of assets on that day are their cost bases
103
what is FBP
Former Business Property. Property that was for business use.
104
involuntary disposal of FBP
occurs if property gets destroyed by natural disaster, theft etc. Insurance proceeds are considered in capital gains calc
105
voluntary disposal of FBP
sell, transfer etc. the property. Or converting it to personal use
106
eligibility requirements for property to qualify as replacement property under the Replacement Property Rules
must be used in business for earning income
similar or related service or Use
timing of replacement - usually within a year before or 4 years after the FBP was disposed of
Designation in Tax return - must be declared on filing
proceeds of disposition- proceeds of FBP must be reinvested into replacement property. If only a portion reinvested, only a portion deferred
Canadian Property
107
why is replacement property important to businesses
taxpayer can elect to defer recapture of CCA or capital gains where property was unvoluntarily disposed of
108
Allowable Business Investment Loss (ABIL)
to qualify, at least half corps assets must have been used in active business conduct at time the individual acquired the shares or debt or for 365 days out of last 2 years before disposition. Can be used to reduce any kind of income, not just capital gains
109
carryback from ABIL
3 preceading years
110
carry forward for ABIL
up to 10 years.
111
what happens if you still have an ABIL balance after you've carried it forward for 10 years and not used it
it becomes a regular capital loss. can't use it to offset regular income anymore.
112
current expense on rental income
costs incurred to maintain property, provide short term benefit like repairs, utility costs (if not paid by the tenant)
113
capital expenditure on rental property
costs incurred from doing things that will reap long term benefits like prolonging the life of a property. New roof, substantial renovations. Not immediately deductible but capitalized and deducted over time through Capital Cost Allowance
114
advantages of claiming CCA on rental property
reduces taxable income in current year and helps defer taxes
115
disadvantages of using CCA on rental property
reduces ACB of property so larger capital gain when it is sold and possibly significant tax liability because of recapture
116
can you claim CCA on rental property one year and not the next
no, once CCA is claimed, it must continue to be claimed
117
tax on dividends received by CCPC
typically not taxed when received by the CCPC because it was taxed already at the corporate tax rate from the dividend payor.
However, it is subject to the part IV tax, which applies 38 1/3% on certain dividends received by CCPC and is refundable under specific conditions when the dividend is paid out to the CCPCs shareholders.
118
what is an Eligible Small Business Corp (ESBC)
type if CCPC that meets below criteria:
at time of selling, 24 months preceding 50% of assets must have been used in active business activity with 90% coming from Canada
if shares sold by individual, they must be Cdn resident through period beginning at start of last taxation year of corp that ends before the share sale and ending at time of share sale
119
what are requirements to be a QSBC
last 24 moths 50% of market val must be used in active canadian business
at time of sale 90% of corps assets must be in active canadian business
shares must be owned by individual or their spouse for 24 moths
120
qualified Farm Property
property used in canadian farming and meets following criteria:
Real proprty like land and buildings
eligible capital property used in farming (equipment)
shares in a family farm corp or interest in family farm operation
Property must have been used in primarily farming business in which their spouse/child was actively engaged on regular and continuing basis
121
Qualified fishing property
same as Qualified farming property but for fishing
122
taxation of capital gains when you put assets in a Alter Ego or Joint Partner trust
CG deferred if taxpayer is 65+ and deferral lasts until trust disposes of asset or taxpayer/spouse dies
123
tax on transfer to corporation by shareholder
when taxpayer transfers capital property to corp of which they are a shareholder, capital gain is deferred under some conditions though a "revolver" where transfer is made at an amount between ACB and FMV
124
taxation of transfer of capital property into a partnership
if you transfer capital property into a partnership that you are a partner in capital gains are deferred under similar conditions to corp transfers. Amount of transfer can be between ACB and FMV at time of transfer
125
reinvestment in small business corporation shares
Capital gains arising from the disposition of shares in a Canadian small business
corporation can be deferred if the proceeds are reinvested into shares of another
Canadian small business corporation within a specified period
126
what is a capital gains reserve
spreads the capital gains realized over up to 5 years to spread out tax liability. If it is a QSBC sale, the shares must have been held for the required period.
If the deferral involved replacement property provision, taxpayer typically has up to 1 year after end of tax year to replace property
127
can you claim capital gains deferral on terminal tax return
no
128
One-Plus rule for principal residences
taxpayer can designate one more year than the actual year they lived in a property as their primary residence fro tax purposes (if they own multiple properties)
129
how is farm and fishing income taxed
taxed at persons marginal tax rate but have access to deductions, can use cash accounting, capital cost allowance, income averaging
130
what are self employed business owners deductible expenses
home office expenses
vehicle expenses
office supplies and equipment
Ads and marketing
travel
professional fees
insurance costs
131
classes and depreciable rate for depreciable property for CCA
Class 1: Includes most buildings (4% CCA rate).
o Class 3: Includes certain buildings acquired after 1987 (5% rate).
o Class 8: Includes office furniture and equipment (20% rate).
o Class 10: Includes motor vehicles (30% rate).
o Class 12: Includes small tools and certain computer software (100% rate in the year of
purchase).
132
half year rule for CCA
in first year, only 50% of the normal CCA rate can be claimed
133
what do you do with the terminal loss on capital property
happens when sale price < undepreciated cost. You claim the terminal loss against income in that year
134
why should you not claim the CCA on your principal residence
would likely mean you give up your tax exemption
expenses related to the personal use property would not be deductible
135
when is interest owed on a spousal loan for splitting purposes
Jan 30th of the following year and must be declared as income by lending spouse
136
does interest on spousal loan for splitting change with the CRAs updates to the prescribed loan?
No
137
Payin spouse/adult child directors fees for income splitting
can pay spouse or adult child for their role as a director if they are reasonable for the actual duties performed
138
paying guarantee fees for income splitting
business owner or self employed person can pay spouse a reasonable fee based on the risk and liability, for guaranteeing a loan
139
adding family members as shareholders to receive dividends as an income splitting tool
in family owned corp you can do this so dividends are taxed in the adult childs hands. Strategy is subject to Tax on Split Income (TOSI) rules which can apply higher tax rates
140
maximizing LCGE on sale of small business
can add adult family members as shareholders as each shareholder can claim LCGE
141
Family Trust as tool to reduce taxes on business
family business with family as benes transfers income and dividends to their tax rates
142
What is TOSI
Tax on Split Income applies high tax rates to certain types of split income with family, particularly with minors, to negate the tax benefit of splitting. Affects dividends, shareholder benefits from business, and certain capital gains
143
what is a related business in regards to TOSI
if a related person (spouse, parent, sibling) runs it or if you own 10% along with other related persons
144
what is a specified individual under TOSI
someone who is directly or indirectly involves with the business and related to individual or entity providing income
145
what is "excluded amount" in TOSI
amount not subject to TOSI. Salary, wages earned reasonably. Returns on an excluded business
146
Excluded shares in TOSI
shares of a specific corp that TOSI doesn't apply to its dividends. This is shares of a non-service business where person owns at least 10% of votes and value of company
147
excluded business in TOSI
business that you actively engage on regular continuous and substantial basis, not subject to TOSI
148
Reasonable Return in relation to TOSI
considers contributions made by family member. If reasonable compared to return/income, not subject to TOSI
149
taxation of resident alien vs non resident alien in the US
resident alien taxed like a citizen on worldwide income. non res taxed on US source income only
150
2 ways people are tested for residency in the US for tax
1st is someone who is lawful PR is treated as US resident even if not physically present.
Second is substantial presence test.
151
substantial presence test rules
formula calcs how long you are in the US over 3 year period
days in current year + 1/3 days in prev year + 1/6 days the year before that.
If in the US for 31 days in current year or 183 days in last 3 yrs, you are a resident.
152
what if you fail the substantial presence test and would have to pay tax in US as resident?
ClosER connection test - if <183 days in current year and maintain tax home elsewhere, that has greater assets than in US they can be exempt from filing. Must fill out form 9940
Tax Treaty Tie Breaker test - to avoid being resident of US and Canada, you are only resident of where your permanent home is and if no home or both homes, where you have more economic ties (centre of vital interest). If not, habitual abode is where you are considered resident. If not determinable after that, where you are a citizen. If both, countries decide by mutual agreement
153
Taxation of a snowbird's rental property in the US
taxed in 1 of 2 ways:
1. WHT on 30% with out any deductions and not reduced by tax treaty
2. Net rental income and deduct expenses and depreciation which is mandatory and usually more advantageous to clients. Must file an election AND report the net rental income in Canada as well (will get foreign tax credits)
154
taxation on sale of US property for snowbirds
profit = purchase price + cost of permanent improvements - depreciation
LT gain if held longer than 1yr and tax is 0-20%. If less than 1yr, they pay based on US graduated tax rate
Currency fluctuations will make the gain/loss reportable as different numbers in Canada and the US
155
is there a tax benefit from getting a US mortgage as a snowbird
not unless you are going to rent it out and file a US tax return
156
difference in mortgage interest calculations in US vs Canada
US monthly, Canada semi-annually
157
If you earn interest on US bank deposits do you have to file in the US
Not if you are a non resident alien. You can earn interest from American Banks and just need to file a W8 BEN. You must pay tax on it on your canadian return though
158
do Canadians have to pay tax on US gov bonds or US corp bonds to the IRS
no but 15% WHT on other bonds that aren't those.
159
WHT on US dividends for Canadians
15%
160
FATCA
requirements to make sure US residents that own accounts outside the US are reported by those financial institutions to the IRS.
161
what is the taxable amount on a snowbird's estate in the US if deemed a resdient
based on the FMV of US deemed assets and max is 40%.
162
When is no US estate tax payable
if worldwide assets are <5.49m
When US assets are <$60k
163
Are Canadian MFs that hold US shares and ADRs considered in US assets for estate tax
no
164
ways to reduce US estate tax
sell the US property held if it would create less tax on CG.
Consider holding US shares through MFs
gift property prior to death (subject to gift tax tho)
ensure worldwide estate is less than U$5.49m
Acquire life insurance to cover the tax at death (but careful as life insurance held personally is included in world wide estate)
Finance US real property with non recourse mortgage to reduce estate value by mortgage amount
165
US annual gift exemption
$14k to unlimited number of recipients
166
Can a Canadian will be used to transfer US property
yes but probate might apply in both jurisdictions. 1st probate is where the person lived, second would be where they held property. Better to include separate section in WIll to deal with US property
167
How are distributions from a partnership taxed
not considered taxable income when received but instead impact the ACB of the partner's shares. If the distribution exceeds their ACB in the partnership, a capital gain is triggered
168
In a partnership, does each partner calculate their CCA on property?
No, the partnership calculates the CCA and then each partner gets their allocated amount of it to report in the own personal returns
169
are transfers into a partnership or sole proprietorship considered dispositions
yes unless you file the section 85 rollover to elect a price between the original ACB and FMV
170
what is a capital account of a partnership
tracks their original and ongoing economic interest in the partnership
171
how does a partners allocation of income impact their acb in the partnership
increases acb
172
what happens if you have a negative ACB in a partnership
means you have received more from the partnership than you put in. Creates a capital gain in the year it occurs and must be reported on income tax return. This brings their ACB back to 0
173
what is the restriction on number of shareholders to be a private corporation
usually 50 or fewer shareholders
174
how is salary from a CCPC taxed in the corp
deducted as an expense
175
Advantages of taking salary versus dividends from a corp
creates RRSP room for receiver, pay into CPP benefits (corp and receiver), can be good way to split income if paying family members in lower tax bracket
176
tax impact on corp by paying a capital dividend
tax neutral for the corp, nothing happens as it is paid from the capital dividend account which is exempt or already been subject to tax
177
what is purpose of small business deduction
to reduce taxes for small businesses so they can invest in their businesses instead. Applies to CCPCs active business income
178
what is the amount of the small business deduction
9% federally on first $500k of active business income
179
Eligible RDTOH
This account, where applicable, includes a portion of taxes paid on eligible dividends received from other corporations. These dividends are eligible for the enhanced dividend tax credit when distributed to individual shareholders. The Eligible RDTOH regime allows corporations to get a refund of these taxes when they pay out eligible dividends.
180
what is the purpose of the RDTOH
It ensures that investment income earned within a corporation and then distributed to shareholders as dividends is taxed at the same overall rate as it would be if an individual directly earned it.
181
when must you pay a shareholder loan back by
usually within a year otherwise it is considered income
182
Paid Up Capital (PUC)
the money a company has received from shareholders in exchange for stock
183
what does Purifying Assets of a CCPC mean
adjusting corps asset composition to be more active income to qualify for LCGE. Can provide better creditor protection also as active busienss income usually less exposed to creditors
184
how can you purify assets in a ccpc
pay dividend to get rid of the passive assets
use passive assets to pay off debts
use passive assets to purchase business assets
pay salaries/bonuses
185
Personal Service Business
when you are techincally a contractor but CRA sees the relationship as almost employee employer. NOt eligible for small business deduction and other tax advantages available to ccpc. Presence of a "specified employee" increases liklihood it is a PSB
186
Advantages of using a holding company
creditor protection and separation from the operating company.
can be part of estate freeze
can be useful in purification process
can help in income splitting by distributing dividends to family members who are shareholders and are in lower tax brackets
187
If you own an investment property as joint tenants what happens on death of one of the jt tenants
deemed disposition and capital gains on the deceased person's portion are due even though it passes directly to surviving joint tenant
188
Reduced Standby charge for personal use of company vehicles
Applies when the personal use of the vehicle is relatively low compared to its total use (<50% of the time or <20k km/yr)
Reduced standby charge = (basic charge)(avg personal use per mth) /1,667
Basic standby charge is cost of vehicle X 2%
or for leased cars its 2/3 lease payment x 12 mths
189
When must sole proprietors or businesses register and collect GST/HST
when their worldwide taxable revenues exceed $30k
190
is there a capital gain when you transfer capital property
yes if it is anyone other than your spouse
191
AMT calculation
Employment Income + Rental Income + CCA + 60% of 1/2 Capital Gains - Basic Minimum Tax Exemption - Personal Credits
192
Does Net Rental Income create RRSP room
yes
193
If one spouse is self employed and the other is not, can both spouses file income taxes by the self-employed deadline of June 15?
Yes, the June 15 deadline applies to self employed people and their spouses
194
What 2 factors is the Canada Child Benefit based on
parent income, age of child (separate amounts for children below 6 and 6-17)
195
Charitable donation tax credit rules
You can claim up to 75% of your income as a tax credit. If you donated more than what you made in income, you will have to carry forward the remainder for up to 5 years. In year of death limit is 100% of income.
For the first $200 of donations, the credit is 15% of the donation amount.
For donations exceeding $200, the credit is 29% of the donation amount.
For donations exceeding the top federal income tax bracket threshold, the credit is 33% of the amount over the threshold (for 2024, the threshold is $235,675).
196
Are RRIF minimums from a Spousal RRIF subject to the attribution rules
No, any withdrawal made from a spsl rrif in excess of the minimum is attributed to the contributor but not the min
197
How do you calculate the rrif minimum
RRIF value X (1/(90-age))
198
How do you calculate Cumulateive Eligible Capital expenditure
CEC = (Eligible capital expenditure * 75% + Starting Balance) - (Maximum Eligible capital expenditure * annual allowance %)
The max eligible capital exp is 15k
199
How do you declare capital gains on property that payment will be received for over time
Capital gains on property can be deferred, but only up to a maximum of 1/5 of the capital gain. This is only available when the payment for the sale is expected to be received over time and not all at once at the time of sale. You must include 1/5 of the capital gain TIMES the number of taxation years since the disposition
200
Do RRSP withdrawals count as pension income
no
