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

Question 1

Which of the following is FALSE regarding Tax Free Savings Accounts (TFSAs)?

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

Answer 1

B

Question 2

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

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

Answer 2

A

Question 3

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

Answer 3

C

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 an Matthew related for tax purposes?
B)Mr. Field is the sole shareholder of Corporation X, and Mrs. Field, (Mr. Field's wife)is the sole s 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. 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 t of Corporation A. The remaining forty percent of the shares are owned by Steven, who is a friend of 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 related for tax purposes?

Question 5

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

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

Question 6

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 disposed of 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 disposed of 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 disposed of at market value.
D)All property left to a spouse and to others is deemed to be disposed of at cost.