Deck 10: Individuals: Determination of Taxable Income and Taxes Payable

Question 1

On February 16^th,20X4,Samantha received an eligible dividend in the amount of $2,000.She is in a 40% tax bracket.How much is Samantha's dividend tax credit for 20X4? (Assume a DTC of 15%.)

A) $300
B) $414
C) $2,000
D) $2,760

Answer 1

B

Question 2

Stuart Planter owns a small country plot where he resides with his family.In the spring and summer,Stuart and his family grow vegetables to sell at the local farmer's market.Stuart earned $83,000 this year at his full-time teaching job.During the year he also incurred farm expenses totaling $12,000 and farm revenues totaling $8,000.
Stuart has asked you to help him prepare his tax return for the year,and provides you with the following additional information:
• Net capital losses from the previous year total $10,000.
• Stuart had the following amounts deducted from his pay during the year: CPP and EI of $3,340; and federal income tax of $21,000.
• Stuart invested a total of $20,000 during the year to a TFSA and GICs.He contributed $5,000 to his TFSA,and the remainder to a guaranteed investment certificate which pays 4% annually.His first interest payment is due on June 30^th of the following year.
• Stuart's wife works full-time and earns $68,000 a year.She does not claim any of the children's tax items on her tax return.
• Stuart's three children (born in 2000,2002,and 2005)were all fitted with braces on their teeth during the year.The total cost was $7,500 and Stuart did not receive any reimbursement for the cost.
• All three of his children played soccer during the year.The registration cost for each child was $700.
• None of the children have a source of income.
Required:
Calculate Stuart's minimum federal tax liability for the current year.Explain why any items may have been omitted.(Round all numbers to zero decimal places.)

Answer 2

Items omitted:
Net-capital loss: Archie did not incur a capital gain during the year,so cannot apply this loss.
Property income: The interest on the TFSA is non-taxable; and the interest on the GIC may be claimed in the following year.

Question 3

Which of the following is false with respect to the final returns of deceased taxpayers?

A) Unused net capital losses less any capital gains deductions previously claimed are deductible against any income.
B) Non-refundable tax credits are prorated to the date of death on the final tax return.
C) A Rights and Things return may be filed in addition to the final tax return.
D) Of the tax returns available for a deceased taxpayer, only the final tax return must be filed.

Answer 3

B

Question 4

Which of the following is an accurate list of some of the personal federal tax credits available to reduce the federal tax liability?

A) dividend, non-capital loss, charitable donations, age amount
B) caregiver, employment credit, medical expenses, disability
C) education amount, adoption expenses, farming, child fitness credit
D) public transit pass, pension, Canada pension plan, qualified small business deduction

Question 5

ABC.Ltd.had unused allowable capital losses of $20,000 during the current fiscal year and an unused business loss of $10,000.Which of the following statements is true?

A) All of the losses will be lost if not used in this fiscal year.
B) The unused allowable capital loss will be converted to a net-capital loss and can be carried back 3 years and forward indefinitely, and the unused business loss will be converted to a non-capital loss and can be carried back 3 years and forward twenty years.
C) The unused business loss will be converted to a net-capital loss and can be carried back 3 years and forward indefinitely, and the unused allowable capital loss will be converted to a non-capital loss and can be carried back 3 years and forward twenty years.
D) The unused business loss will be converted to a non-capital loss and can be carried back 3 years and forward indefinitely.

Question 6

Archie Smith works full-time as a dentist.He lives on an acreage where he raises chickens.He sells the chickens' eggs at local markets.During the current year,Archie incurred farm expenses totalling $8,500 and received $5,200 in farm revenues from the sale of eggs.
Required:
a)What is the name of the type of loss that Archie will be able to recognize on his tax return?
b)Calculate the loss that Archie can apply against his other sources of income in the current year.

Question 7

Sally earned $210,000 during 20X4.She also received eligible dividends in the amount of $10,000.She sold a piece of land during the year and recognized a capital gain of $500,000.Sally is married.Her husband earned $100,000 during the year.
Required:

A)Calculate 1)Sally's normal taxable income,2)Sally's taxable income for the alternative minimum tax,and 3)her federal tax liability,before the deduction of any allowable non-refundable tax credits,for both methods.
B)Which method would allow for a deduction of the non-refundable dividend tax credit?
C)Which method will Sally have to use to report her tax liability?

Question 8

Theodore is 37 years old.He earns $92,000 a year at his job as a financial analyst.His CPP and EI contributions totaled $3,340.Last year he enrolled in an accounting program in order to earn his designation.He was enrolled for eight months,part-time (attending evening classes),and his tuition fees totalled $1,500.Theodore donated $2,000 to Ducks Unlimited (a registered charity for tax purposes),and $800 to a political party.(Theodore has made annual contributions to these organizations for the past five years.)He spent a total of $4,200 on eyeglasses,dental care and prescriptions,none of which was reimbursed.Theodore's wife did not work during the year,as she was enrolled in full-time studies for eight months as a nursing student.Her tuition fees for the year were $8,000.She transferred as much of her tuition and education amount allowable to Theodore.Theodore had a $2,000 non-capital loss carry-forward from the previous year that he incurred during the wind-up of his proprietorship.Theodore and his wife do not have any children.
Required:
Calculate Theodore's federal tax payable for the current year.

Question 9

Susan White incurred the following income,disbursements,and losses in 20X1 and 20X2:

Question 10

Which of the following is a requirement for a business to qualify as a 'qualified small business corporation'?

A) The corporation must be a CCPC that uses at least 50% of the fair market value its assets for active business purposes in Canada at the time the shares are sold.
B) More than fifty percent of the fair market value of the assets of the business must have been used for active business in the past 36 months.
C) The shares must not have been owned by another non-related individual in the past 24 months.
D) The shares must not have been owned by another related individual in the past 24 months.