Type:
Test Bank
Resource:
Canadian Tax Principles, Volume II
Edition:
2020-2021 Edition
Author(s):
Clarence Byrd Ida Chen
Exam Name___________________________________ ESSAY. Write your answer in the space provided or on a separate sheet of paper. 1) The major source of federal revenues is the personal income tax. Indicate three other types of taxes that contribute to federal revenues.
2) What is the meaning of "person" when the term is used in the Income Tax Act? 3) Briefly describe the procedures used in calculating provincial income taxes for individuals in provinces other than Quebec.
4) The Canadian income tax system is often used to achieve various economic objectives. Give three examples that illustrate this point.
5) Provide an example of how taxation policy can be used to influence resource allocation. 6) The government pays a Canada Child Benefit to the parents of children who are under 18 years of age. The payments are reduced by a percentage of income in excess of a specified level. What objectives are achieved by this benefit system?
7) Indicate three disadvantages of a tax system that uses progressive rates. 8) A regressive tax is one that taxes high income individuals at lower effective rates. Explain why a sales tax levied at a flat rate of 8 percent can be regressive.
9) Distinguish between horizontal equity and vertical equity as these terms are used in describing tax systems. 10) What are some of the factors that have led to the entrenched use of tax expenditures as opposed to program spending?
11) While the Sections of the Income Tax Act are numbered 1 through 260, there are actually more than 260 Sections. Explain why this is the case.
12) What purposes are served by Canada's international tax treaties? 13) List four non-legislative sources of income tax information. 14) What is the meaning of "taxation year" as the phrase is used in the Income Tax Act? 15) Under what circumstances will a person who is not resident in Canada be required to pay Canadian income taxes?
16) What is the importance of residence in Canadian income taxation? 17) When an individual leaves Canada, the CRA may take the position that he has retained his residence status. What are the primary factors that the CRA will consider in determining whether such an individual has, in fact, ceased to be a Canadian resident?
18) List three factors that would be considered in the determination of whether or not an individual is a resident of Canada.
19) If an individual leaves Canada for a temporary absence, this raises the question of whether he was a Canadian resident during the period of absence, particularly if some residential ties have been retained. What are the major factors that are considered in determining whether an individual continues to be a Canadian resident during a temporary absence?
20) One of your friends is leaving Canada and would like to know when he will no longer be considered a Canadian resident. Briefly explain the rules related to terminating an individual's status as a Canadian resident.
21) For the current year, Jane Doe is deemed to a Canadian resident because she sojourned in Canada for 210 days. Also for the current year, Jack Fawn, a long-time resident of Manitoba, was considered a part year resident for the first 210 days, after which he permanently departed from Canada. Explain how these two individuals will be taxed in Canada.
22) It is possible that an individual could be considered resident in more than one country. In such situations, "tie-breaker" rules are used to avoid the individual being subject to taxation in both countries. List and describe three factors that would be considered in implementing the tie-breaker rules.
23) Are enterprises that are incorporated in Canada always considered to be resident in Canada? Explain your conclusion.
24) Limon Inc. was incorporated in the U.S. five years ago. However, all of the directors of the corporation are Canadian residents, holding all of their meetings in Montreal. How would Limon Inc. be taxed?
25) What are the components of Net Income For Tax Purposes? 26) 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"?
27) What is the difference between tax avoidance and tax deferral? 28) What is income splitting? Under what circumstances will it provide tax benefits to an individual? 29) Contributions to a Registered Retirement Savings Plan can be deducted to reduce the taxes of an individual in the year that they are made. However, these contributions will be subject to tax when they are withdrawn from the plan. What type of tax planning is involved in this arrangement?
30) Your client, a government employee, would like to reduce his taxes. He is trying to decide whether he should contribute $5,000 to an RRSP this year. He has an RRSP as does his wife, a part time employee at a day care centre. Briefly describe the basic goals of tax planning. What advice would you give your client regarding his RRSP contribution? Explain your conclusion.
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 31) A value added tax is a tax levied on the increase in value of a commodity or service that has
31) ______
been created by the taxpayer's stage of the production or distribution cycle.
32) A partnership can be a taxable entity for income tax purposes.
32) ______
33) A partnership can be a taxable entity for GST purposes.
33) ______
34) In general, provincial income taxes for individuals are based on a specified percentage of
34) ______
federal tax payable.
35) The federal government does not collect personal or corporate taxes for Ontario or Quebec.
35) ______
36) A sales tax is a regressive tax even when it is applied at a single rate on all transactions.
36) ______
37) A major advantage of progressive tax rates is that their use encourages economic growth.
37) ______
38) Tax expenditures are less costly to administer than direct funding programs.
38) ______
39) Part I of the Income Tax Act is the largest and most important part.
39) ______
40) The citation ITA 61(4)(b)(ii) would be read Paragraph 61, Subparagraph 4, Section b, Subsection
40) ______
ii.
41) Any taxpayer can choose the calendar year as their taxation year.
41) ______
42) If there is a conflict between an international tax treaty and Canadian tax legislation, the
42) ______
Canadian tax legislation will prevail.
43) An income tax is payable for each taxation year on the Taxable Income of every person resident
43) ______
in Canada at any time in the year.
44) Canadian citizens are required to file a Canadian income tax return, without regard to where
44) ______
they currently live.
45) When an individual is absent from Canada for some period of time, the length of their absence
45) ______
is an important factor in determining whether they continued to be a Canadian resident during the period of their absence.
46) If an individual moves to Canada and is here less than 183 days prior to the end of the year,
46) ______
that individual will be subject to Part I tax on their worldwide income for the entire year.
47) The residency of a trust depends on the country in which the central management and control
47) ______
of the trust takes place, not where the beneficiaries reside.
48) If an individual leaves Canada, the three most significant factors in determining whether he has
48) ______
ceased to be a resident are: • Whether he continues to own a dwelling in Canada. • Whether he is accompanied by his spouse or common-law partner. • Whether he maintains social ties in Canada.
49) If an individual returns to Canada after an absence of less than two years, S5-F1-C1 indicates
49) ______
that, in general, he will be considered to have retained Canadian residency during his absence.
50) A part year resident for the current year is an individual who either establishes residency in
50) ______
Canada during the current year or, alternatively, terminates residency in Canada during the current year.
51) A sojourner is any individual who has been present in Canada for 183 consecutive days in one year.
51) ______
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 52) Which of the following types of taxes is not currently in use by the federal government of 52) ______ Canada? A) Custom Duties
B) Transfer Tax
C) Head Tax
D) Excise Taxes
53) Which of the following is NOT a taxable entity for Canadian income tax purposes? A) Ms. Sarah Bright, a Canadian resident. B) The Martin family trust. C) Darklyn Ltd., a Canadian resident corporation. D) Walters and Walters, a group of CPAs operating as a partnership.
53) ______
54) Which of the following could be required to file a GST return? A) Min Chan (an individual) B) Chan's Clothing Store (an unincorporated business) C) The Chan Foundation (a registered charity) D) All of the above could be required to file a GST return.
54) ______
55) Which of the following forms of taxation provides the largest component of federal government
55) ______
taxation revenues? A) Goods and services tax C) Corporate income tax
B) Employment insurance premiums D) Personal income tax
56) With respect to provincial income taxes, other than those assessed in Quebec, which of the
56) ______
following statements is NOT correct? A) The federal government collects the provincial income tax for individuals for every province except Quebec. B) Each province can establish rules for determining the Taxable Income of individuals. C) Each province can establish its own tax credits to apply against Tax Payable for individuals. D) Each province can apply different rates to as many brackets for individuals as it wishes.
57) Which of the following groups of entities are all subject to taxation on income? A) Individuals, trusts and corporations B) Individuals, partnerships and corporations C) Proprietorships, corporations and trusts D) Individuals, proprietorships and corporations
57) ______
58) Income tax is calculated for which of the following groups of jurisdictions? A) Provincial, federal, and international B) Municipal, provincial, and federal C) Municipal, federal, and international D) Municipal, provincial, and
58) ______
international
59) Which of the following statements with respect to Canadian tax policy is NOT correct? A) The inability to harmonize the GST in some provinces has increased the complexity of tax compliance. B) A progressive tax system is unfair to individuals with incomes that fluctuate significantly from year to year. C) The economic burden of a particular tax may not fall on the same group that has the legal liability to pay the tax.
59) ______