Question 1

Each rental property that is owned by an individual that has a cost in excess of $50,000 must be placed in a separate CCA class. What is the objective of this requirement?

Accepted Answer

The goal here is to ensure that the individual is not able to escape recapture when he disposes of the property. Rental properties often have a fair market value that exceeds their UCC. If each such asset is in a separate CCA class, when the asset is sold and the proceeds of disposition are subtracted from the UCC, the result will be a negative balance that must be taken into income. If the property was not allocated to a separate CCA class, this result could be avoided by simply acquiring another rental property and adding its cost to the CCA class. As recapture only arises if there is a negative balance at the end of the period, there would be no recapture if this addition eliminates the deficit in the CCA class.

Question 2

Which of the following statements with respect to dividends is NOT correct?

Accepted Answer

A) Capital dividends can be received by individuals without tax consequences. 
B) All taxable dividends paid by Canadian controlled private corporations are non-eligible dividends. 
C) Stock dividends are subject to the same gross up and tax credit procedures as cash dividends. 
D) Dividend tax credits are based on a percentage of the gross up on dividends received. 
A) Capital dividends can be received by individuals without tax consequences. 
B) All taxable dividends paid by Canadian controlled private corporations are non-eligible dividends. 
C) Stock dividends are subject to the same gross up and tax credit procedures as cash dividends. 
D) Dividend tax credits are based on a percentage of the gross up on dividends received. B

Question 3

Louis received a "hot tip" from a friend about Fine Mine Ltd. He borrowed $10,000 from a bank April 1, 2020 and used the funds to purchase 1,000 common shares in the company for $10 each. Louis sold the shares June 30, 2020 for $15 a share and repaid the loan which included $148 of interest. As a result of these transactions Louis's net income for 2020 would have increased by:

Accepted Answer

A) $2,352. 
B) $2,426. 
C) $2,500. 
D) $4,852. 
A) $2,352. 
B) $2,426. 
C) $2,500. 
D) $4,852. A

Question 4

Fergus owns a rental property. Instead of hiring contractors he does all of the property maintenance and repairs himself, keeping careful records. Which one of the following amounts is not a deduction for tax purposes?

Accepted Answer

A) $700 for shrubs and flowers. 
B) $250 for bookkeeping services. 
C) $400 for lumber, paint and hardware. 
D) $500 for his labour (50 hours @ minimum wage of $10 per hour). 
A) $700 for shrubs and flowers. 
B) $250 for bookkeeping services. 
C) $400 for lumber, paint and hardware. 
D) $500 for his labour (50 hours @ minimum wage of $10 per hour).

Question 5

Corporations must use the full accrual approach to recognize interest inclusions.

Accepted Answer

A) True 
 B)False

Question 6

Indicate two differences between the tax treatment of business income and the tax treatment of property income.

Accepted Answer

The required two differences can be sele

Question 7

Yang owns 800 units in a mutual fund that invests exclusively in the shares of Canadian public corporations. During 2020, the fund paid a distribution of $1.50 per unit. One-half of the distribution was eligible dividend income and the remaining half was capital gains. By how much will Yang's Taxable Income increase as a result of the distribution?

Accepted Answer

A) $600. 
B) $1,128. 
C) $1,200. 
D) $1,428. 
A) $600. 
B) $1,128. 
C) $1,200. 
D) $1,428.

Question 8

For tax purposes, stock dividends must be treated in exactly the same manner as cash dividends.

Accepted Answer

A) True 
 B)False

Question 9

Jorge purchased a newly issued $20,000 corporate bond for $19,500 on November 1, 2020. The maturity date of the bond is October 31, 2025 and the annual interest rate is 5%, paid on October 31 of each year. How much interest income should Jorge report on his 2020 and 2021 tax returns if he wants to minimize the interest recognized for tax purposes?

Accepted Answer

A) $0 in 2020 and $975 in 2021. 
B) $0 in 2020 and $1,000 in 2021. 
C) $167 in 2020 and $833 in 2021. 
D) $167 in 2020 and $1,000 in 2021. 
A) $0 in 2020 and $975 in 2021. 
B) $0 in 2020 and $1,000 in 2021. 
C) $167 in 2020 and $833 in 2021. 
D) $167 in 2020 and $1,000 in 2021.

Question 10

Alice Baxter acquires a residential property on May 1, 2020. The total cost of the property is $385,000, with $95,000 of this total being allocated to the land. She spends $3,500 to paint the interior and exterior of the building. During 2020, rents total $29,000 and expenses other than CCA and the cost of painting total $20,100. Determine the maximum CCA that is available for 2020. In addition, determine Ms. Baxter's minimum net rental income for the year.

Accepted Answer

Net rental income for Ms. Baxter will be

Question 11

When foreign tax authorities withhold taxes on the foreign source income of a Canadian resident, only the net amount received will be included in the Net Income For Tax Purposes of the Canadian resident.

Accepted Answer

A) True 
 B)False

Question 12

Maria owns 500 units in a mutual fund that invests exclusively in bonds issued by Canadian public corporations. During 2020 the mutual fund received bond interest and paid income distributions of $1.12 per unit. Maria reinvested all of her distributions. The effect on Maria's 2020 Taxable Income is:

Accepted Answer

A) Increase of $280. 
B) Increase of $560. 
C) Increase of $773. 
D) $0 because the distributions were reinvested. 
A) Increase of $280. 
B) Increase of $560. 
C) Increase of $773. 
D) $0 because the distributions were reinvested.

Question 13

Which of the following statements is correct?

Accepted Answer

A) Net Property Income = Dividends received plus the gross-up minus the dividend tax credit. 
B) Net Property Income = Dividends received minus the gross-up minus the dividend tax credit. 
C) Federal Tax Payable = Federal tax on grossed-up dividends minus the dividend tax credit. 
D) Federal Tax Payable = The gross up on dividends received minus the dividend tax credit. 
A) Net Property Income = Dividends received plus the gross-up minus the dividend tax credit. 
B) Net Property Income = Dividends received minus the gross-up minus the dividend tax credit. 
C) Federal Tax Payable = Federal tax on grossed-up dividends minus the dividend tax credit. 
D) Federal Tax Payable = The gross up on dividends received minus the dividend tax credit.

Question 14

During the 2020 taxation year, Ms. Andrea Molsen receives non-eligible dividends of $14,200. Her income is such that this additional amount will be taxed at a 26 percent federal rate and a 7 percent provincial rate. The provincial dividend tax credit on non-eligible dividends is 25 percent. Determine the total federal and provincial tax that will be payable on these dividends and her after tax retention.

Accepted Answer

Federal and provincial Tax Payable on th

Question 15

Aziz purchased a residential rental property on April 15, 2020. He paid $300,000 cash for the building and paid an additional $540 for eligible rental expenses during 2020. He rented the property on May 1 to long term tenants for $2,500 per month. On his 2020 tax return he should report net rental income of:

Accepted Answer

A) $1,460. 
B) $7,918. 
C) $7,378. 
D) $19,460. 
A) $1,460. 
B) $7,918. 
C) $7,378. 
D) $19,460.

Question 16

Mutual funds can be organized as either corporations or trusts.

Accepted Answer

A) True 
 B)False

Question 17

Saul has two residential rental properties that are mortgaged. Both properties are in Class 1 with a CCA rate of 4 percent. At the beginning of the year, Property A has a UCC of $500,000 and Property B has a UCC of $1,100,000. Before consideration of CCA, Property A earned net rental income of $43,000, and Property B had a net rental loss of $27,000. What is the maximum amount of CCA Saul will be able to claim this year?

Accepted Answer

A) Nil. 
B) $16,000. 
C) $20,000. 
D) $44,000. 
A) Nil. 
B) $16,000. 
C) $20,000. 
D) $44,000.

Question 18

Alex Bodvin acquires a residential rental property on June 1, 2020 at a total cost of $423,000. Of this total, $132,000 can be allocated to the value of the land. He immediately spends $42,000 to make major improvements to the property. Rents for the year total $32,000, while rental expenses other than CCA total $27,500. This is the only rental property owned by Mr. Bodvin. Determine the maximum CCA that is available for 2020. In addition, determine Mr. Bodvin's minimum net rental income for the year.

Accepted Answer

Net rental income for Mr. Bodvin will be

Question 19

Which of the following statements with respect to income trusts and mutual funds is NOT correct?

Accepted Answer

A) Mutual funds can be organized as either trusts or corporations. 
B) When an income trust makes a capital distribution, the amount received by a unit holder will be deducted from the adjusted cost base of the units held. 
C) Business income received by an income trust will be distributed to investors as business income. 
D) Eligible dividends received by a mutual fund will be distributed to investors as eligible dividends. 
A) Mutual funds can be organized as either trusts or corporations. 
B) When an income trust makes a capital distribution, the amount received by a unit holder will be deducted from the adjusted cost base of the units held. 
C) Business income received by an income trust will be distributed to investors as business income. 
D) Eligible dividends received by a mutual fund will be distributed to investors as eligible dividends.

Question 20

Which of the following statements is NOT correct?

Accepted Answer

A) Income from rental properties can be either business income or property income. 
B) When property income is earned, the income attribution rules are applicable. 
C) Interest paid on a mortgage on a principal residence can be deductible. 
D) Interest paid on funds borrowed to make interest-free loans to employees is not deductible. 
A) Income from rental properties can be either business income or property income. 
B) When property income is earned, the income attribution rules are applicable. 
C) Interest paid on a mortgage on a principal residence can be deductible. 
D) Interest paid on funds borrowed to make interest-free loans to employees is not deductible.

Each rental property that is owned by an individual that has a cost in excess of $50,000 must be placed in a separate CCA class. What is the objective of this requirement?

Which of the following statements with respect to dividends is NOT correct?

Fergus owns a rental property. Instead of hiring contractors he does all of the property maintenance and repairs himself, keeping careful records. Which one of the following amounts is not a deduction for tax purposes?

Corporations must use the full accrual approach to recognize interest inclusions.

Indicate two differences between the tax treatment of business income and the tax treatment of property income.

For tax purposes, stock dividends must be treated in exactly the same manner as cash dividends.

When foreign tax authorities withhold taxes on the foreign source income of a Canadian resident, only the net amount received will be included in the Net Income For Tax Purposes of the Canadian resident.

Maria owns 500 units in a mutual fund that invests exclusively in bonds issued by Canadian public corporations. During 2020 the mutual fund received bond interest and paid income distributions of $1.12 per unit. Maria reinvested all of her distributions. The effect on Maria's 2020 Taxable Income is:

Which of the following statements is correct?

Mutual funds can be organized as either corporations or trusts.

Which of the following statements with respect to income trusts and mutual funds is NOT correct?

Which of the following statements is NOT correct?

Introduction to Federal Taxation in Canada

Procedures and Administration

Income or Loss From an Office or Employment

Taxable Income and Tax Payable for Individuals

Capital Cost Allowance

Income or Loss From a Business

Capital Gains and Capital Losses

Other Income, Other Deductions, and Other Issues

Retirement Savings and Other Special Income Arrangements

Taxable Income and Tax Payable for Individuals Revisited

Taxable Income and Tax Payable for Corporations

Taxation of Corporate Investment Income

Other Issues in Corporate Taxation

Corporate Taxation and Management Decisions

Rollovers Under Section 85

Other Rollovers and Sale of an Incorporated Business

Partnerships

Trusts and Estate Planning

International Issues in Taxation

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Filters

Exam 7: Income From Property

Each rental property that is owned by an individual that has a cost in excess of $50,000 must be placed in a separate CCA class. What is the objective of this requirement?

Which of the following statements with respect to dividends is NOT correct?

Fergus owns a rental property. Instead of hiring contractors he does all of the property maintenance and repairs himself, keeping careful records. Which one of the following amounts is not a deduction for tax purposes?

Corporations must use the full accrual approach to recognize interest inclusions.

Indicate two differences between the tax treatment of business income and the tax treatment of property income.

For tax purposes, stock dividends must be treated in exactly the same manner as cash dividends.

When foreign tax authorities withhold taxes on the foreign source income of a Canadian resident, only the net amount received will be included in the Net Income For Tax Purposes of the Canadian resident.

Which of the following statements is correct?

Mutual funds can be organized as either corporations or trusts.

Which of the following statements with respect to income trusts and mutual funds is NOT correct?

Which of the following statements is NOT correct?

Introduction to Federal Taxation in Canada

Procedures and Administration

Income or Loss From an Office or Employment

Taxable Income and Tax Payable for Individuals

Capital Cost Allowance

Income or Loss From a Business

Capital Gains and Capital Losses

Other Income, Other Deductions, and Other Issues

Retirement Savings and Other Special Income Arrangements

Taxable Income and Tax Payable for Individuals Revisited

Taxable Income and Tax Payable for Corporations

Taxation of Corporate Investment Income

Other Issues in Corporate Taxation

Corporate Taxation and Management Decisions

Rollovers Under Section 85

Other Rollovers and Sale of an Incorporated Business

Partnerships

Trusts and Estate Planning

International Issues in Taxation

Gst-Hst

Filters