Deck 9: Other Income, Other Deductions, and Special Rules for Completing Net Income for Tax Purposes

Question 1

Which of the following deductions are allowed as 'other' deductions for tax purposes?

A) Contributions to an individual's Canada Savings Bonds, fees for an appeal in relation to an assessment under the Income Tax Act, and contributions to an individual's RRSP.
B) Lump sum support payments to a former spouse, contributions to an individual's RRSP, and fees for an appeal in relation to an assessment under the Income Tax Act.
C) Support payments for a child, moving expenses against income at the previous location and child care expenses.
D) Contributions to an individual's RRSP, fees for an appeal in relation to an assessment under the Income Tax Act, and moving expenses against income at the new location.

Answer 1

D

Question 2

Which of the following is FALSE regarding the Tax Free Savings Account (TFSA)?

A) There is no mandatory age by which a TFSA must be wound up.
B) TFSA contributions are tax deductible.
C) Any unused amounts not contributed in a year may be carried forward indefinitely to future years.
D) Capital gains earned within TFSAs are not taxed.

Answer 2

B

Question 3

Steve gifted shares in a public corporation which cost $10,000 to his fifteen year old son,Simon.During the year,Simon received $500 in dividends.Simon then sold the shares for $12,000.Which of the following tax situations is true for Steve and Simon?

A) Simon will have to claim the dividends and capital gain on his tax return.
B) Steve will have to claim the dividends on his tax return and Simon will have to recognize the capital gain on his tax return.
C) Steve will have to claim the dividends and a capital gain on his tax return.
D) Simon will have to claim the dividends on his tax return and Steve will have to recognize the capital gain on his tax return.

Answer 3

B

Question 4

Indicate whether or not the parties in the following situations are "related" for tax purposes.

A)Mr.Grey and his sister's son,Matthew,are negotiating an economic transaction.Are Mr.Grey and Matthew related for tax purposes?
B)Mr.Field is the sole shareholder of Corporation X,and Mrs.Field,(Mr.Field's wife)is the sold shareholder of Corporation Y.Are the two corporations related for tax purposes?
C)Sarah owns seventy percent of the shares of ABC Co.Andrew owns the remaining thirty percent.Sarah and Andrew are not related.Is Andrew related to ABC Co.?
D)Glen owns thirty percent of the shares of Corporation A.Glen's wife also owns thirty percent of the shares of Corporation A.The remaining forty percent of the shares are owned by Steven,who is a friend of the family.Is Glen related to Corporation A for tax purposes?
E)Tammy and her brother's wife Angela are negotiating an economic transaction.Are Tammy and Angela related for tax purposes?

Question 5

Identify whether the following sources of income and expenditures are included for the calculation of net income for tax purposes.

Question 6

In 20X4,Tom Depuis moved 2874 kilometers from Anytown,Province1 to Newtown,Province2 to assume the position of manager for his company at the Newtown head office,beginning October 1^st.Tom received a salary of $5,100 per month at his new job.He incurred the following moving costs:

Question 7

Case One
Marsha had total income of $112,000 and earned income of $75,000 in 2013.At the end of 2013,she had unused RRSP contribution room of $12,000.Her pension adjustment from 2013 was $5,000.She anticipates a pension adjustment of $7,000 in 2014.
Required:
Calculate the maximum RRSP deduction that Marsha can make for the 2014 taxation year.
Case Two (Independent of Case One)
Marsha is 35 years old.She has the option of investing $2,000 per year in a savings account at 8%,or $2,000 in an RRSP at 8%.The money will be invested for the next 30 years,and will not be withdrawn until she retires.
Required:
Calculate the amount of each option,net of taxes,if Marsha withdraws all of the money when she turns 65? Assume that her tax rate will be 35% every year until she retires.

Question 8

Upon the death of a taxpayer,which of the following statements is true?

A) Capital property that is left to a spouse is deemed to be sold at cost, and all other capital property is deemed to be sold at market value.
B) Capital property that is left to a spouse is deemed to be sold at market value, and all other capital property is deemed to be sold at cost.
C) All property left to a spouse and to others is deemed to be sold at cost.
D) All property left to a spouse and to others is deemed to be sold at market value.

Question 9

Car Co.is selling its land and building to Truck Co.for $340,000 (Land $200,000; Building $140,000).These values have not been officially appraised,and Truck Co.is arguing that the land is only worth $150,000 and the building is worth $190,000.(Car Co.originally paid $100,000 for the land and constructed the building for $150,000.The UCC on the building is currently $130,000.)Which of the following statements is true based on these facts?

A) Future CCA will be higher for Truck Co. under Car Co.'s terms.
B) Car Co. will recognize higher net capital gains under Truck Co.'s terms.
C) Car Co. will recognize higher recapture under Truck Co.'s terms.
D) The allocation of the costs is irrelevant as the total price is the same under both sets of terms.

Question 10

Agatha earned $35,000 at her job from January 1^st - October 10^th of 20X4.She accepted a new position with the company in a town 1312 kms away,and began the new job on November 1^st,20X4,earning a gross salary of$4000 per month.
Agatha's moving expenses included:
$7,000 for a moving van
$500 in meals en route for Agatha and her 4 year old daughter
$700 in accommodations en route
$4000 ($200 per day)for 20 nights of accommodations and meals in the new location until her apartment was available.(Agatha used the receipt method for these meals.)
$550 in gas receipts
Agatha also received the following amounts in 20X4:
*The support payments are in accordance with Agatha's divorce agreement,which calls for monthly support payments of $1,500 for Agatha and $1,500 for her daughter.
The 20X4 meal and vehicle rates used to calculate travel and meal expenses under the simplified method are:
$17 per meal to a maximum of three meals per day,per person C:\Users\User\Dropbox\Quizplus Parsing Documents\To Be Parsed\M\TB1840,Canadian Income Taxation 2014 2015 Edition by William Buckwold\Test Bank (2014-2015)\Test Bank (2014-2015)\Images\Chapter 09 Other Income,Ot_6.jpg
Required:
Determine Agatha's net income for tax purposes for 20X4,using the aggregate formula to show your work.