Deck 4: Taxable Income and Tax Payable for Individuals

Question 1

Explain the advantage that results from being able to claim medical expenses for any 12 month period that ends in the calendar year.

Answer 1

The base for medical expenses is reduced by the lesser of 3 percent of the taxpayer's Net Income For Tax Purposes and $2,397 (for 2020). If, for example, an individual had large medical costs in the second half of 2019 and the first half of 2019, deducting the sum of these costs in the 12 month period ending June 30, 2020 would result in only one reduction. In contrast, if the relevant amounts were deducted in each of the two calendar years, the lesser reduction would be applied twice, once in 2019, and again in 2020.

Question 2

Under what circumstances can a taxpayer deduct the ITA 118(1)(b)credit for an eligible dependant?

Answer 2

In order to claim this deduction, the taxpayer must be a person who is unmarried, does not have a common-law partner, or is separated. The claim must be for an individual who is living with the taxpayer in a self-contained domestic establishment. Further, the dependant has to be under 18 at any time during the year, the taxpayer's parent or grandparent, or mentally or physically infirm. The dependant must be related by blood, marriage, common-law partnership or adoption, and must be wholly dependent on the taxpayer for support. Note that, except in the case of the taxpayer's child, the dependant must be a resident of Canada.

Question 3

When a taxpayer claims the spousal credit for an infirm spouse ($13,229 or less + $2,273 for 2020), an additional amount of the Canada caregiver amount may be available. Under what circumstances is this additional amount available and, when it is available, how is it calculated?

Answer 3

While the base for the spousal credit adds an amount for an infirm spouse, this base is reduced, on a dollar-for-dollar basis, for the spouse's Net Income For Tax Purposes. If the resulting credit base is less than the Canada caregiver amount (for 2020, $7,276, reduced by the spouse's Net Income For Tax Purposes in excess of $17,085), an additional amount is available. The additional amount is the difference between the income reduced base for the spousal credit and the amount that would have been the Canada caregiver amount.

Question 4

An individual may choose not to claim in the current taxation year, the full amount of a charitable donation made in that year. Explain why this may be an appropriate course of action.

Question 5

An unmarried father is supporting a dependent child of 16 who is mentally infirm, but who does not qualify for the disability tax credit. What tax credits, if any, would be available to him related to that child?

Question 6

Explain briefly the rules for determining which province will assess an individual for income taxes. From the point of view of tax planning, is the province in which an individual is taxed an important issue?

Question 7

For individuals 65 or over, several types of income qualify for the pension income tax credit. Indicate three types of pension income that would qualify. Indicate one type of pension income that would not qualify.

Question 8

Indicate the types of tuition fees that are eligible for the tuition fees tax credit.

Question 9

Under what circumstances can the disability tax credit be transferred to a supporting person?

Question 10

Most tax credits involve applying the minimum tax rate (currently 15 percent)to a specified based. In contrast, the charitable donations credit also uses the rates of 29 and 33 percent. What is the likely reason for this difference?

Question 11

Certain credits against Tax Payable can be transferred to a spouse or common-law partner. Indicate which credits are eligible for this transfer. Include only credits that can be transferred, not credits that can be taken by either spouse or common-law partner.

Question 12

Some analysts contend that the OAS clawback is effectively an increase in an individual's tax rate. Explain this view.

Question 13

A medical expense tax credit, based on the total medical expenses for a family, can be claimed by either spouse. Does it make any difference which spouse makes the claim?

Question 14

Briefly explain the difference between a tax deduction and a tax credit.

Question 15

Worker's compensation payments received are not included in an individual's Net Income For Tax Purposes.

Question 16

The Canada caregiver provisions treat infirm children over 17 differently than infirm children under 18. Describe the difference.

Question 17

Some tax credits are referred to as "refundable". What does this mean?

Question 18

Tax legislation requires that amounts received under the workers' compensation program be included in the determination of Net Income For Tax Purposes, despite the fact that these same amounts will be deducted in the determination of Taxable Income. If the intent was not to tax these amounts, why didn't the legislation simply exempt them from inclusion in the Net Income For Tax Purposes calculation?

Question 19

ITA 118(1)(a)provides a tax credit for an individual's "spouse or common-law partner". Briefly describe the types of relationships that are eligible for this tax credit.

Question 20

Describe the relationships that are eligible for the Canada caregiver amount of $7,276 for 2020.

Question 21

An individual cannot claim the pension income credit if their only income is from the Canada Pension Plan.

Question 22

Which of the following contains a list of personal federal tax credits that will reduce the tax liability of an individual?

A)Canada caregiver, employment credit, medical expenses, disability
B)Medical expenses, standby charge, charitable donations, age
C)Tuition, adoption expenses, work space in home, pension
D)Age, home accessibility, Canada pension plan, moving expenses

Question 23

There is no limit on the amount of the tuition credit that can be transferred to a spouse.

Question 24

Which of the following statements with respect to an individual's Tax Payable is NOT correct?

A)Provincial Tax Payable is calculated by applying the appropriate rate to Taxable Income.
B)The relevant provincial tax rate is based on the province in which the individual resides on December 31 of the taxation year.
C)Only federal taxes are assessed on residents of Canada who are not a resident in any Canadian province on December 31 of the taxation year.
D)All provinces use the same tax brackets for applying their rates.

Question 25

If both spouses have medical expenses, it will usually be to their advantage for one of the spouses to claim the credit on the basis of their combined medical expenses.

Question 26

Which of the following statements is correct?

A)Net income for tax purposes minus federal tax credits equals taxable income
B)Taxable income minus federal tax credits equals total federal tax
C)Total federal tax minus federal tax credits equals federal tax payable
D)Net income for tax purposes minus federal tax credits equals federal tax payable

Question 27

The refundable medical expense supplement is available to any individual who is 18 years of age or older.

Question 28

All federal tax credits are calculated by multiplying the lowest federal income tax bracket rate by an indexed base figure.

Question 29

For 2020, Bart Bixley has Net Income For Tax Purposes and Taxable Income of $230,000. During the year, he makes a cash gift to a registered charity of $75,000. What is his maximum charitable donations tax credit for 2020?

A)$21,722
B)$24,714
C)$22,318
D)$24,742

Question 30

If total federal tax (before tax credits)is equal to $10,000 then taxable income must be:

A)$48,780.
B)$56,338.
C)$61,803.
D)$66,667.

Question 31

Which of the following items is NOT a deduction in the determination of an individual's Taxable Income?

A)Worker's compensation payments received as a result of injury.
B)A business loss incurred during the current year.
C)A deduction for residing in a prescribed northern zone.
D)An allowable capital loss realized in a previous year.

Question 32

Which of the following statements with respect to the calculation of an individual's Tax Payable is correct?

A)Provincial tax payable is calculated by applying a group of progressive rates to federal Tax Payable.
B)Income that is not taxed in a province is subject to an additional tax at the federal level.
C)The provincial tax rate is based on the province in which the individual spends the most number of days in the taxation year.
D)The applicable rate varies both with the amount of Tax Payable and the type of income being taxed.

Question 33

During the year, Ted Knight received worker's compensation payments totaling $10,000 as a result of an injury he suffered at work. His only other source of income for the year was his wages of $25,000. Which one of the following represents Ted's Net and Taxable Incomes for the year?

A)Net Income $25,000, Taxable Income $25,000.
B)Net Income $30,000, Taxable Income $30,000.
C)Net Income $35,000, Taxable Income $25,000.
D)Net Income $35,000, Taxable Income $35,000.

Question 34

With respect to claiming tax credits related to an individual's child, which of the following statements is NOT correct?

A)To claim the eligible dependant credit for a child, the child must be under the age of 18 at some time during the year.
B)The Canada caregiver credit for a child under 18 cannot be claimed if the parent is claiming the eligible dependant credit for that child.
C)An individual cannot claim the eligible dependant credit if they are living with, supporting, or being supported by a spouse.
D)To claim the eligible dependant credit for a child, the child does not have to be a resident of Canada, provided they are living with the taxpayer.

Question 35

The clawback of OAS payments will not alter the individual's Net Income For Tax Purposes.

Question 36

If an individual's total federal tax (before the application of credits)equals $18,529, then his Taxable Income must have been:

A)$71,265.
B)$63,893.
C)$79,695.
D)$102,065.

Question 37

A person claiming the ITA 118(1)(b)tax credit that is available to an eligible individual supporting a related dependant in a self-contained domestic establishment can claim the credit for their child, even if the child is not a resident of Canada.

Question 38

The federal political contributions tax credit is deductible in computing Taxable Income, but cannot create a Taxable Loss.

Question 39

Provincial income taxes are calculated as a percent of federal Tax Payable.

Question 40

Sharon Jarvis contributed $500 to the Federal Liberal Party. She is eligible for a federal political contributions tax credit of $500.

Question 41

During 2020 Fred had the following amounts deducted from his pay: He can use all of the above to calculate federal tax credits except:

A)CPP.
B)EI.
C)Union Dues.
D)United Way Donation.

Question 42

Mildred has $300 budgeted for donations. It will go either to the SPCA (a registered charity)or the Green Party (a registered federal political party). If she gives the money to the Green Party, her tax credit will be:

A)the same amount that she would get from donating to the SPCA.
B)$180 more than she would get from donating to the SPCA.
C)$138 more than she would get from donating to the SPCA.
D)$166 more than she would get from donating to the SPCA.

Question 43

Harry is divorced with net income for tax purposes of $50,000. His 21 year old dependent daughter, Ann had net income for tax purposes of $15,000. During 2020 Harry paid a total of $2,500 for eligible medical expenses for Ann. Harry had no medical expenses of his own. Harry's medical expenses tax credit for 2020 is:

A)$15.
B)$150.
C)$308.
D)$2,050.

Question 44

Which of the following tax credits CANNOT be transferred to a spouse?

A)The age credit.
B)The disability credit.
C)The EI and CPP credits.
D)The pension income credit.

Question 45

Adam is self-employed. He might be eligible for all of the following federal tax credits except:

A)CPP tax credit.
B)EI tax credit.
C)Canada employment tax credit.
D)Canada Workers Benefit tax credit.

Question 46

Jennifer is single with no dependants. During the year she had the following amounts deducted from her salary: Based on this information, Jennifer's total federal tax credits for 2020 will be:

A)$563.
B)$2,547.
C)$2,734.
D)$2,813.

Question 47

Jake Baxter donated $100,000 in cash to a Canadian registered charity. His Net Income For Tax Purposes and Taxable Income for the year is $120,000. Calculate Jake's maximum federal tax credit for charitable gifts.

A)$13,500.
B)$15,000.
C)$26,072.
D)$28,972.

Question 48

Of the following statements about tax credits, which one is correct?

A)They are deducted from total income and are effectively not subject to tax.
B)They reduce tax by the same amount regardless of a taxpayer's marginal tax rate.
C)They are deducted from Net Income For Tax Purposes and are effectively not subject to tax.
D)Their impact is greater for taxpayers with a higher marginal tax rate.

Question 49

Jean Marchand is a single parent with a child. Which of the following conditions is NOT required for Jean to claim the ITA 118(1)(b)credit for an eligible dependant?

A)Jean must maintain a self-contained domestic establishment.
B)The child must be under 18 years of age, or mentally or physically infirm.
C)The child must be a resident of Canada.
D)The child must be wholly dependent for support on Jean.

Question 50

Joe, who is single, supports his 80 year old blind mother who has no income and lives in a nursing home. Which of the following federal tax credits can he claim for his mother?

A)Disability tax credit only.
B)Disability tax credit and Canada caregiver tax credit only.
C)Disability tax credit and eligible dependant tax credit only.
D)Canada caregiver credit only.

Question 51

Shamus provides support for the following dependants: • His 42 year old spouse who has a physical infirmity.
• His 63 year old father who has a mental infirmity.
• His 67 year old mother who is in good health.
• His 12 year old son who has a physical infirmity.
He can claim the Canada caregiver credit (based on $7,276 for 2020)for:

A)his father only.
B)all of the listed dependants.
C)his mother only.
D)his spouse, his father, and his mother.

Question 52

Which of the following relatives may NOT be used to claim the Canada caregiver tax credit ($7,276 for 2020)?

A)A physically infirm 62 year old aunt.
B)A mentally infirm 21 year old child.
C)A healthy 67 year old grandfather.
D)A physically infirm 35 year old sister.

Question 53

Hilda is a 67 year old widow. She lives in an apartment with her old 12 year old granddaughter, Sue. Both of Sue's parents are on a two year expedition to remote areas of the Yukon. They provide all financial support for Sue and speak with her weekly via satellite. Which of the following federal tax credits can Hilda claim regarding Sue?

A)Eligible dependant tax credit.
B)Canada caregiver tax credit for child under 18.
C)Canada caregiver tax credit.
D)No tax credits available.

Question 54

Bill is single with no dependants. For 2020 his net income for tax purposes was $80,000, his Taxable Income was $70,000 and his medical expenses tax credit was $300. How much were his eligible medical expenses?

A)$2,000
B)$4,397
C)$4,400
D)$4,100

Question 55

With respect to the federal political contributions tax credit, which of the following statements is correct?

A)Contributions made to any registered political party are eligible for the credit.
B)Contributions made to a candidate at the time of a federal general election are eligible.
C)The credit is equal to 29 percent of the eligible contributions made.
D)There is no upper limit to the amount of the credit that can be claimed, as long as the contributions are made within the legal limits governing campaign contributions.

Question 56

Which of the following tax credit bases is NOT subject to full indexation?

A)Amount for an eligible dependant.
B)Age amount.
C)Disability amount.
D)Pension income amount.

Question 57

Of the following statements about the spousal tax credit, which one is correct?

A)To claim this credit, the claimant must be legally married to the relevant individual.
B)It can be claimed by either spouse.
C)If the individuals are married during the year, the base for the credit must be reduced by the spouse's income since the date of the marriage.
D)In the year of separation or divorce, an individual can claim both spousal support payments and the spousal tax credit.

Question 58

Of the following statements about medical expenses, which one is correct?

A)A taxpayer can only claim his own medical expenses.
B)The claim must be made in the calendar year the expense was incurred.
C)Only expenses in excess of a specified amount are eligible for a tax credit.
D)The amount of the tax credit is dependent on the taxpayer's marginal tax rate.

Question 59

For an individual who is over 65 years of age, which of the following types of pension income does NOT qualify for the ITA 118(3)pension income tax credit?

A)Payments from the Canada Pension Plan.
B)Old Age Security payments.
C)Payments from a provincial pension plan.
D)All of the above.

Question 60

Which of the following relatives may NOT be used to claim the eligible dependant tax credit?

A)Healthy grandfather age 65.
B)Healthy daughter age 9.
C)Mentally infirm spouse age 65.
D)Mentally infirm brother age 19.

Question 61

Oscar is 73 years old. His 2020 net income for tax purposes from his RRIF and other investments is $120,000. He lives with his common-law partner, Felix who is 63 years old. Felix's only income for 2020 was investment income of $6,000. Oscar can claim all of the following federal tax credits except:

A)basic personal tax credit.
B)age tax credit.
C)pension tax credit.
D)spousal tax credit.

Question 62

Leon Fiero has 2020 Net Income For Tax Purposes and Taxable Income of $70,400. Each week, without fail, he plays a nation-wide lottery. While over the years he has not had any winnings of consequence, his fortunes have changed and, in 2020, he wins over $320,000. Ashe had hoped to do for many years, he donates $120,000 of these winnings to the Canadian Cancer Society in 2020. He chooses to claim $15,000 of his donations in 2020. In 2021, his income remains at $70,400 and he makes no further donations.
Determine Mr. Fiero's charitable donations tax credit for 2020, as well as the maximum amount of the donation that he can use in 2021. Until what year can he claim any unused portions of his 2020 donation?

Question 63

Toshiro Mifune is single and lives with his 62 year old mother, Anna Mifune. Anna has a physical infirmity which makes her dependent on Toshiro. It is not, however, severe enough to qualify for the disability tax credit. Anna has 2020 Net Income For Tax Purposes of $18,300. Determine the amount of 2020 tax credits that Toshiro will have related to his mother.

Question 64

Ingrid Tower is a 45 year old widow. Her Net Income For Tax Purposes consists of rental income. She maintains a home for herself and her two children. Her 19 year old son has a physical disability that makes him wholly dependent on Ingrid for support. However, he does not qualify for the disability tax credit. He has no income of his own. Her daughter is 13 year sold, is in good health, and has 2020 Net Income For Tax Purposes of $1,230. Determine Ms. Tower's maximum federal tax credits for 2020.

Question 65

Harry Rose is 71 years of age and has 2020 Net Income For Tax Purposes of $62,485. Determine Harry's age credit for 2020.

Question 66

Mr. Don Deloran has 2020 Net Income For Tax Purposes of $26,100. His spouse is dependent on him because of a physical infirmity. The infirmity is not sufficient to qualify for the disability tax credit. She has 2020 Net Income For Tax Purposes of $5,800. Mr. Deloran has no tax credits other than the basic personal credits for his spouse and himself. Determine Mr. Deloran's federal tax credits for 2020.

Question 67

During 2020, Canadian resident Mark Forbes has calculated his Taxable Income to be $53,175. Calculate his 2020 federal Tax Payable before consideration of credits.

Question 68

Canadian resident Zack Bronson has 2020 Taxable Income of $102,485. Calculate his 2020 federal Tax Payable before consideration of credits.

Question 69

Farah Delorme is married to Frank Delorme. Frank has a mental infirmity. They have a 26 year old son who is dependant because of a physical infirmity. Neither infirmity is severe enough to qualify for the disability tax credit. Frank has 2020 Net Income For Tax Purposes of $4,600. Their son has no 2020 income. Determine the amount of any 2020 tax credits that Farah will have related to her spouse and son.

Question 70

With regards to the transfer of education related credits, which of the following statements is NOT correct?

A)If the student is married, the tuition credit can be transferred to either the spouse or a parent.
B)Any education related amounts that are not transferred to another person can be carried forward and claimed by the student.
C)Credits related to tuition paid to a university outside of Canada cannot be transferred to another person.
D)Credits related to interest paid on a student loan cannot be transferred to another person.

Question 71

Gloria Mason is a single mother who takes care of her 10 year old son, Mark. Mark has a physical infirmity. The infirmity is not severe enough to qualify for the disability tax credit. Marches no income of his own. Determine the amount of any 2020 tax credits that Gloria will have related to her son.

Question 72

Mr. John Foret is 42 years old and divorced from his wife. His Net Income For Tax Purposes consists of rental income. He has retained the family home and both of the children of the marriage live with him. His daughter is 23 years old and has a physical disability that makes her wholly dependent on him for support. However, she does not qualify for the disability tax credit. His son is 14 years old and in good health. His daughter has no income during 2020,while his son has Net Income For Tax Purposes of $2,100. Determine Mr. Foret's maximum federal tax credits for 2020.

Question 73

Margo Riche is married to John Riche. John has a mental infirmity. They have a 22 year old daughter who has a physical infirmity. Neither infirmity is severe enough to qualify for the disability tax credit. John has 2020 Net Income For Tax Purposes of $6,600. Their daughter has no 2020 income. Determine the amount of any 2020 tax credits that Margo will have related to her spouse and daughter.

Question 74

Ms. Marlene Burns is 69 years old and has 2020 Net Income For Tax Purposes of $46,642.Determine Ms. Burns' age credit for 2020.

Question 75

Claude Lafleur and his spouse have adopted an infant French orphan. The adoption process began on January 2, 2020 when they applied to an adoption agency licensed by the provincial government. Later that month they traveled to France to discuss the adoption and view available children. The cost of this trip was $3,850. Their provincial government opens the adoption file on March 15, 2020, and the adoption order is issued on September 29, 2020. In October, the couple returns to France to pick up their new daughter. The happy family returns to Canada on October 20, 2020. The cost of this trip is $6,280.
Additional expenses paid during the first week of October, 2020 were $1,759 paid to the French orphanage and $5,600 paid to a Canadian adoption agency. Legal fees incurred during the adoption period were $3,250. After arrival in Canada, an additional $3,200 in medical expenses were incurred for the child prior to the end of 2020. Mr. Lafleur's employer has a policy of providing reimbursement for up to $4,500 in adoption expenses eligible for the adoption expenses tax credit. This amount is received in October, 2020 and will be considered a taxable benefit to Mr. Lafleur. What is the maximum adoption expenses tax credit that can be claimed by the couple? Show your calculations.

Question 76

Elaine Markham lives with her husband and 11 year old daughter. Her husband's income is less than the basic personal tax credit amount. Her 81 year old mother also lives with the family. While her mother has 2020 investment income of $10,000, she has a physical infirmity that makes her dependent on Elaine. Determine the amount of Elaine's Canada caregiver tax credit, if any, for 2020.

Question 77

Nadel Lyon has 2020 Net Income For Tax Purposes of $32,400. His common-law partner has Net Income For Tax Purposes of $8,420. Nadel has no tax credits other than the basic personal credits for his common-law partner and himself. Determine Nadel's federal tax credits for 2020.

Question 78

Mauricio Saidi is a single parent. He and his 10 year old son, who was born paralyzed from the neck down, live in the house he owns. His son qualifies for the disability tax credit. During 2020, Mauricio spends $8,600 putting in a more accessible wheel-in shower in the child's bathroom and $2,500 for a mechanical lift on his truck for his son's wheelchair. What is the maximum amount that Mauricio can claim in 2020 as a home accessibility tax credit?

Question 79

Sheila Cox is a single mother who takes care of her 14 year old daughter, Susan. Susan has a physical infirmity. The infirmity is not severe enough to qualify for the disability tax credit. Susan has 2020 Net Income For Tax Purposes of $3,400. Determine the amount of any 2020 tax credits that Sheila will have related to her daughter.

Question 80

Gerrard Bensen lives with his wife and their two children. His wife's income is less than the basic personal tax credit amount. Two years ago, his mother who is 72 years old and extremely healthy, moved in with him. Her Net Income For Tax Purposes for 2020 is $18,400. Determine the amount of Gerrard's Canada caregiver tax credit, if any, for 2020.