Deck 3: Liability for Tax, Income Determination, and Administration of the Income Tax System

Question 1

Which of the following type of payment is NOT subject to Canadian withholding tax when paid to a non-resident?

A)Pension benefits
B)Registered retirement income fund payments
C)Dividends
D)Interest paid to an arm's length party

Answer 1

D

Question 2

Allison Hill moved to Canada on April 30th of this year. She was born and raised in Belgium and
moved to Canada to start a career in architecture. She earned $45,000 from May to December of this year from her new employer. Prior to leaving Belgium, Allison earned $10,000 of employment
income. She also received $1,000 in dividends in March and $1,000 in dividends in September from stocks in a European corporation. Allison's parents sent her a cheque for $2,000 as a gift for her 25th birthday in August.
Required:
Determine Allison's residency status for Canadian tax purposes for the current year. How much inco Allison required to report on her T1 tax return? Explain why any items have been excluded from you calculations.

Answer 2

'Part-year or part-time resident' or 'Resident as of April 30th or April 30th to December 31st (or wording indicating knowledge of the concept)
$45,000 (Canadian employment income)+ $1,000 (dividend received while a Canadian reside purposes)= $46,000
The following items have been omitted:
· Income from employer in Belgium prior to Allison becoming a Canadian resident
· Dividends received prior to becoming a Canadian resident
· Birthday gift from parents is not taxable

Question 3

Answer the following questions which pertain to the administration of the Canadian Income Tax syst
Individuals (who do not carry on a business)must file an income tax return for the most recent calen by which date?
Individuals who carry on an unincorporated business must file an income tax return for the most rece calendar year by which date?
Who is responsible for the filing of a deceased taxpayer's tax return? What is the taxation year for an inter vivos trust?
What is the taxation year for a testamentary trust?
A trust must file an income tax return within how many days of its taxation year-end? What is the taxation year for a corporation (other than a professional corporation)?
A corporation is required to file an income tax return within how many months of its taxation year-e

Answer 3

1. April 30
2. June 15
3. The deceased's legal representative
4. The calendar year
5. A chosen fiscal period
6. 90 days
7. A chosen fiscal period, not exceeding 53 weeks
8. 6 months

Question 4

Regarding taxation years, which of the following statements is TRUE?

A)Corporate taxpayers must use the calendar year as their taxation year.
B)Individual taxpayers may choose any twelve month period as their taxation year.
C)A corporation may have a taxation year less than twelve months during a year the corporation is formed, dissolved, or is granted a change in its year end.
D)The taxation year for an individual taxpayer ends on April 30th.

Question 5

Of the following individuals, which would not be considered a resident of Canada for the entire 20x1 taxation year?

A)June moved to Canada three years ago from the United States, and has maintained her American citizenship.
B)John had lived in Canada all of his life, prior to moving to Germany in 20x1, where he was assigned to a seven-month assignment to set up the international operations for his Canadian employer. He did not sell his home on Vancouver Island, as his wife and children remained in Canada for work and schooling reasons.
C)Prasham is a citizen of India, where he lived his entire life prior to moving to Canada on April 30th, 20x1. Upon arriving in Canada, he began full-time work and purchased a home.
D)Marie is a Swiss citizen who lived in Canada from February to October of 20x1. While in Canada, she joined the local fitness club, gained part-time employment, and opened an account in a Canadian bank.

Question 6

George and Gina Anderson, (Canadian citizens), moved to Europe on August 15th, 20x1 to open
and incorporate a café in a small Italian village. Prior to moving, George earned $65,000 in 20x1 as a computer programmer and Susan earned $67,000 in 20x1 as a registered nurse. They are both in
their 60s and plan to retire in Italy, which is Gina's birthplace. They sold their home prior to moving to Europe. As the couple only expects to return to Canada every second year, they cancelled their ban accounts and driving licenses. Their café was successful in 20x1 and earned a pre-tax profit of $25,0 year's end.
Required:
Determine the residency status of George and Gina and their café for Canadian tax purposes in 20x1 discuss the Canadian tax treatment, if any, of their personal and business income. (Assume there we no assets with realizable gains upon their move.)

Question 7

Joe is a Canadian citizen. In March of 20x1, Joe was transferred to the United States by his employer. His wife and child moved with him at that time. Joe chose not to sell his house, and instead, lends it to his family during the winter months when they visit Canada from overseas. Joe has five weeks of vacation each summer, at which time he and his family return to Canada and stay in their house. Joe did not cancel his country club membership in order that he could golf with his friends on his vacations. He did close his bank accounts, however. Which of the following statements is true?

A)Joe might be considered to have a continuing state of relationship with Canada.
B)Joe is considered a part-time resident of Canada for the five weeks he vacations in the country.
C)Joe no longer resides in Canada, and will therefore, automatically be considered a non-resident of Canada.
D)Joe is a Canadian citizen, and will therefore, automatically be considered a Canadian resident for tax purposes.

Question 8

Paragraph (a)of Section 3 of the Income Tax Act includes which of the following?

A)Income from: business, other items, and capital transactions.
B)Income from: employment, property, and capital transactions.
C)Income from: employment, property, business, and capital transactions.
D)Income from: employment, property, business, and other items.