Question 1

If an individual is required to make income tax instalment payments, one acceptable pat- tern of payments is to base each payment on one-quarter of the estimated Tax Payable for the current taxation year.

Accepted Answer

The answer of If an individual is required to make...

Question 2

With respect to the filing of an individual income tax return, which of the following state- ments is correct?

Accepted Answer

If an individual has disposed of a capital property during the year, they are required to file an income tax return, even if no tax is payable. This is because the disposition of a capital property triggers a capital gains or losses, which need to be reported on the tax return. The other statements are incorrect. An individual is not required to file an income tax return if no tax is payable for the year, unless they meet other filing criteria such as capital gains or losses. An individual's age is generally irrelevant in determining whether they are required to file a tax return. Finally, having only business income does not necessarily trigger a filing requirement.

Question 3

Because the taxation year of an individual must be based on the calendar year, all individ- uals will have the same filing due date.

Accepted Answer

The answer of Because the taxation year of an individual...

Question 4

Exam Exercise One - 4 (Regressive Taxes)
Samantha Taylor has Taxable Income for the current year of $625,000, of which $216,000 is spent on goods and services that are subject to Harmonized Sales Tax (HST) at a rate of 13 percent.Her sister, Martha Taylor, is a part-time student living in the same province and has Taxable Income of $12,000.During the current year, as a result of using some of her savings, she spends $21,400 on goods and services that are all subject to HST.
Determine the effective sales tax rate as a percentage of the income of the two sisters.

Accepted Answer

The answer of Exam Exercise One - 4 (Regressive Taxes)
Samantha...

Question 5

All corporations must file their tax returns no later than six months after the end of their fis- cal year, and pay any balance of tax owing no later than three months after the end of their fiscal year.

Accepted Answer

Corporations generally must file their tax returns within six months after the end of their fiscal year, but the payment of any balance of tax owing is typically due within two months after the fiscal year-end, not three.

Question 6

If an individual believes that the amount of income taxes withheld by his employer is greater than the amount that he will have to pay in a particular year, he can make a request to the CRA to have his source deductions reduced.

Accepted Answer

The answer of If an individual believes that the amount...

Question 7

Without regard to whether an individual's filing due date is April 30 or June 15, any bal- ance of tax owing must be paid by April 30.

Accepted Answer

Regardless of the individual's filing due date (April 30 or June 15), any balance of tax owing must be paid by April 30.

Question 8

Exam Exercise One - 2 (Taxable Entities For GST Purposes)
Which of the following entities could be required to file a GST return?
• Sally Forbes (an individual)
• Forbes Boutique (an unincorporated business)
• Forbes and Delaney (a partnership)
• The Forbes family trust (a trust)
• Forbes Enterprises Ltd.(a corporation)
• The Forbes Foundation (an unincorporated charity)

Accepted Answer

The answer of Exam Exercise One - 2 (Taxable Entities...

Question 9

Exam Exercise One - 5 (Non-Resident Liability For Tax)
Ms.Michelle Walker, a U.S.citizen, has Canadian employment income of $42,000 and U.S.employment income of $40,000 Canadian.She lives in Seattle, Washington and is a resident of the United States for the entire year.Ms.Walker does not believe that she is subject to taxa- tion in Canada.Is she correct?
Explain your conclusion.
Introduction - Exam Exercises

Accepted Answer

The answer of Exam Exercise One - 5 (Non-Resident Liability...

Question 10

The interest rate applicable on refunds to individuals is 4 percentage points less than the interest rate applicable on amounts owing to the CRA.

Accepted Answer

The answer of The interest rate applicable on refunds to...

Question 11

Making contributions to an RRSP always involves what type of tax planning?

Accepted Answer

Making contributions to an RRSP involves tax deferral as the money contributed is deducted from your taxable income, resulting in a lower tax bill. Tax avoidance and income splitting are not necessarily involved in RRSP contributions.

Question 12

The penalty for an individual making insufficient instalment payments is 5 percent of the total unpaid tax at the filing date, plus 1 percent per month.

Accepted Answer

The penalty for insufficient installment payments is typically calculated based on IRS guidelines, which may vary, but it is not specifically 5 percent plus 1 percent per month.

Question 13

Exam Exercise One - 3 (Federal And Provincial Taxes Payable)
Joan Smith has Taxable Income of $37,500.For the current year her federal tax rate is 15 percent, while the corresponding provincial rate is 8.2 percent.Determine Ms.Smith's combined federal and provincial tax payable, before consideration of any available credits against Tax Payable.

Accepted Answer

The answer of Exam Exercise One - 3 (Federal And...

Question 14

If quarterly instalments must be paid by an individual, they can be calculated as one-quar- ter of the net tax owing for the preceding year.

Accepted Answer

Quarterly instalments can be calculated as one-quarter of the net tax owing for the preceding year.

Question 15

Tax avoidance involves deliberately ignoring a specific provision in the Income Tax Act.
Procedures And Administration

Accepted Answer

Tax avoidance involves exploiting loopholes or gaps in tax laws to minimize or eliminate tax liabilities, while still complying with the letter of the law. It is distinct from tax evasion, which involves deliberately failing to report or underreporting income or overstating deductions to reduce taxes owed. Tax avoidance is not illegal, but it is generally frowned upon and may be subject to challenge by tax authorities.

Question 16

Exam Exercise One - 1 (Taxable Entities For Income Tax Purposes)
Which of the following entities could be required to file an income tax return?
• Sally Forbes (an individual)
• Forbes Boutique (an unincorporated business)
• Forbes and Delaney (a partnership)
• The Forbes family trust (a trust)
• Forbes Enterprises Ltd.(a corporation)
• The Forbes Foundation (an unincorporated charity)

Accepted Answer

The answer of Exam Exercise One - 1 (Taxable Entities...

Question 17

Interest and penalties may be waived or reduced in extraordinary circumstances, such as those involving natural disasters or serious illness.

Accepted Answer

This statement is true. The IRS has the ability to waive or reduce interest and penalties in cases of extraordinary circumstances, such as natural disasters or serious illness. However, taxpayers must request relief and provide documentation to support their claim.

Question 18

The notice of objection for a corporation must be filed within 90 days from the date of mailing of the notice of assessment.

Accepted Answer

According to the Canada Revenue Agency (CRA), the notice of objection for a corporation must be filed within 90 days from the date of mailing of the notice of assessment.

Question 19

If an individual dies after October in a particular taxation year, his legal representatives must file his tax return by the later of his normal filing due date and six months after the date of his death.

Accepted Answer

This is true as per the IRS guidelines.

Question 20

The GAAR provisions are not applicable to gifts to adult children.

Accepted Answer

The General Anti-Avoidance Rule (GAAR) provisions are not applicable to gifts to adult children. However, it is essential to ensure that the gift is not structured in a manner to avoid or reduce tax liability.

Quiz 1: Byrd Chens Canadian Tax Principles