Deck 11: Corporationsan Introduction

Question 1

When shares are transferred from one group of shareholders to another and there is a change in control, which of the following is correct?

A)Net-capital losses that arise following the change in control are automatically deemed to have expired.
B)Non-capital business losses arising prior to the change in control may be used against income from the business that incurred the loss if that business is carried on at a profit, or reasonable expectation of profit, in the year in which the losses are
Applied.
C)Non-capital losses arising prior to the change in control are automatically deemed to have expired.
D)Net-capital losses arising prior to the change in control may be used against income from the business that incurred the loss if that business is carried on at a profit, or reasonable expectation of profit, in the year in which the losses are applied.

Answer 1

B

Question 2

Many corporations carry on business in more than one province. Assuming a corporation from Province A wishes to conduct business in Province B, the corporation will not have to pay tax in Province B if

A)the permanent establishment in Province B has a lower sales to wage ratio than the ratio in Province A.
B)the parent corporation sets up a branch in Province B.
C)business is conducted with the other province by way of direct sales from Province A.
D)a branch treaty exists between the two provinces.

Answer 2

C

Question 3

Which of the following statements accurately describes the tax treatment of Canadian corporations?

A)Public corporations are granted beneficial tax treatment on the first $500,000 of business income.
B)CCPCs recognize the general tax reduction on all business income.
C)Public and private Canadian corporations are eligible for the small business deduction.
D)Public and private Canadian corporations are eligible for the general tax reduction.

Answer 3

D

Question 4

Coffee Co. began operations in 20x0 and recognized $37,000 in business income and $1,000 in taxable capital gains that year. In 20x1, the company incurred a business loss of $25,000, a taxable capital gain of $2,000, and an allowable capital loss of $5,000.
Business income for 20x2 was $50,000, taxable capital gains were $4,000, and the
Company received $10,000 in dividends from a taxable Canadian corporation. Coffee Co. utilizes any unused losses in the earliest years possible, Which of the following taxable incomes are correct after all carry-over adjustments have been made?

A)20x0: $38,000; 20x1: ($28,000); 20x2: $64,000
B)20x0: $12,000; 20x1: $0; 20x2: $52,000
C)20x0: $37,000; 20x1: $0; 20x2: $27,000
D)20x0: $13,000; 20x1: ($0; 20x2: $61,000

Question 5

Which of the following scenarios is FALSE?

A)It is possible for the after-tax profits of ABC Co. to be shifted to its parent company by way of dividends, without an immediate tax consequence.
B)The taxable income of ABC Co. may be reduced by the amount of dividends received from other taxable Canadian corporations.
C)The taxable income of ABC Co. may be reduced by the amount of dividends received from affiliated foreign corporations.
D)An individual's taxable income may be reduced by the amount of dividends received from taxable Canadian corporations.