Exam 1: Introduction to Federal Taxation in Canada

Which of the following statements with respect to using tax expenditures rather than program spending is NOT correct?

Where would an individual find the formula for determining the prescribed rate?

Which of the following corporations would NOT be considered a resident of Canada?

All of the following statements are true, except:

Mr. Valone is a U.S. citizen. However, since obtaining permanent residence status in 2006, he has been employed on a full time basis in London, Ontario. His employer is a Canadian subsidiary of a multi-national corporation that operates in a number of different countries. The head office of the company is in the United States. Mr. Valone has been very successful in his position with the Canadian subsidiary. Based on this, he has been offered a promotion which involves a significant increase in salary. However, this promotion is conditional on his moving to the company's head office in Philadelphia no later than March 1, 2020. Given the sizable increase in remuneration, Mr. Valone finds this offer too good to pass up. As he is a U.S. citizen, he has no difficulty getting the appropriate documentation to establish his residency in the U.S. He relinquishes his Canadian driver's licence, as well as his provincial health care card. As required by his employer, he is at his desk in the new work location in the U.S. on March 1. Mr. Valone and his spouse have two children who are attending a private school in London. The current semester at this school lasts until June 15, 2020. In order to provide continuity in their education, Mrs. Valone decides that she and children will remain in Canada until the current semester is finished. They depart on June 20, 2020. The real estate market in London has been somewhat slow of late. As a consequence, the Valone's house is not sold until October 5, 2020. Required: For purposes of assessing Canadian income taxes, determine when Mr. Valone ceased to be a Canadian resident and the portion of his annual income which would be assessed for Canadian taxes. Explain your conclusions.

If an individual returns to Canada after an absence of less than two years, S5-F1-C1 indicates that, in general, he will be considered to have retained Canadian residency during his absence.

A major advantage of progressive tax rates is that their use encourages economic growth.

ITA 3(b)states that a taxpayer should "determine the amount, if any", by which taxable capital gains exceeds allowable capital losses. In this context, what is the meaning of the phrase "the amount, if any"?

Pertinent facts are given for a different individual or corporation in each of the Parts of this problem. For each Part, indicate whether or not this individual or corporation would be considered a Canadian resident for income tax purposes during the current year. Briefly explain your conclusion. Part A - Dorothy is married to Jack, who is a member of the Canadian armed forces serving in Indonesia. Other than a brief visit to Jack's parents' home in Halifax, she has never been to Canada in her life. Because Jack is a member of the Canadian armed forces, neither he nor his wife is subject to taxation in Indonesia. Part B - Alice is a U.S. citizen living in Seattle,Washington. While she leaves many of her belongings at her parent's home in that city, she spends at least four days every week living with her boyfriend in Burnaby, British Columbia. They plan to be married at some future date. Part C - Last year, John transferred to the Cayman Islands office at the request of his Canadian employer. His three year employment contract calls for him to return to work in Canada after its completion. On his departure from Canada, he severed all residential ties with Canada. Part D - Millicent is a U.S. citizen who, until last year, had lived and worked in Canada as a landed immigrant for over 20 years. Last year, after winning $2 million in an Ontario lottery, she left Canada on a two year pleasure trip that will take her to virtually every country in the world. Her husband and children, all Canadian citizens, continue to live at the family home in Port Hope, Ontario. Part E - Berkly Management Inc. was incorporated in Alberta in 1963. Until 1986, its only director resided in that province. In that year, the director was replaced by an individual resident in Fresno, California. Part F - Lorris Ltd. was incorporated in Wisconsin in 1983. Until 1992, all of the directors of the corporation lived in Kenora, Ontario. During this period, the Board of Directors meetings were held in that city. Beginning in 1992, all of the directors have been residents of Green Bay, Wisconsin and all of the Board of Directors meetings have been held in Green Bay.

A sales tax is a regressive tax even when it is applied at a single rate on all transactions.

Making contributions to an RRSP always involves what type of tax planning?

List four non-legislative sources of income tax information.

An individual is liable for income tax in Canada if he:

Which of the following goals is NOT a current economic policy objective of the Canadian tax system?

Vanessa moves to Germany on July 15 of the current year. She is 35 and has lived in Canada all of her life. Which one of the following best indicates Vanessa's Canadian residency status for the current year?

A sojourner is any individual who has been present in Canada for 183 consecutive days in one year.

Indicate which of the corporations described in the following Cases would be considered residents of Canada for the current year. Explain the basis for your conclusion. Case A - Bonix Ltd. was incorporated in Canada in 1981. While it operated in Canada for a number of years, all of its operations, management and directors relocated to the United States in 2008. Case B - Dorad Inc. was incorporated in Ohio in 2003. For several years, all of its directors were residents of Canada, with board meetings being held in Windsor, Ontario. However, in 2008, all of the directors moved to Toledo, Ohio. All Board Of Directors meetings are now held in that city. Case C - Upton Inc. was incorporated in Delaware in 2008. However, the head office of the corporation is in Halifax, Nova Scotia. All of the directors of the corporation are Canadian residents and all meetings of the board of directors are held in Halifax. Case D - Carlin Inc. was incorporated in Canada in 2005. However, its directors have always been residents of the United States, with all of the company's Board Of Directors meetings held in that country.

Which of the following can be considered an advantage of an income tax system based on progressive rates?

Fred Hopkins has employment income of $45,000, a business loss of $14,000, capital gains of $20,000, capital losses of $12,000, and subdivision e deductions of $3,000. Fred's Net Income For Tax Purposes is equal to:

Ms. Sharon Washton was born 26 years ago in Bahn, Germany. She is the daughter of a Canadian High Commissioner serving in that country. Her father still holds this position. However, Ms. Washton is now working in Prague, Czechoslovakia. The only income that she earns in the year is from her Prague marketing job and is subject to taxes in Czechoslovakia. She has never visited Canada. Determine the residency status of Sharon Washton.