Question 1

Earnings on amounts contributed to an RESP accumulate on a tax free basis.

Accepted Answer

This is true. Earnings on amounts contributed to an RESP (Registered Education Savings Plan) do accumulate on a tax-free basis. When the funds are eventually withdrawn from the RESP, they are taxed in the hands of the student who is usually in a lower tax bracket than the contributor.

Question 2

For 2020, contributions to a Tax Free Savings Account (TFSA)are limited to a maximum of $6,000 for the year.

Accepted Answer

The answer of For 2020, contributions to a Tax Free...

Question 3

The contributions that can be made to an RESP for one beneficiary are limited to $50,000.

Accepted Answer

The Canada Education Savings Grant (CESG) and Canada Learning Bond (CLB) contributions are subject to a lifetime limit of $7,200 and $2,000 respectively. However, there is no limit on personal contributions, but the maximum amount that can be contributed to an RESP for one beneficiary is $50,000.

Question 4

An individual is considering making a gift of a portfolio of publicly traded stocks. On the basis of tax considerations, provide advice to this individual as to whether he should give the stocks to his 12 year old daughter or, alternatively, to his spouse. Assume that, if the transfer is to his spouse, the taxpayer does not elect out of ITA 73(1).

Accepted Answer

The answer of An individual is considering making a gift...

Question 5

Chris Shaffer is being transferred by his employer from Prince George, British Columbia to Red Deer, Alberta. The $5,000 in real estate fees paid to sell their Prince George house is a deductible moving cost.

Accepted Answer

Real estate fees paid to sell a home are considered a deductible moving cost according to the Canada Revenue Agency (CRA).

Question 6

Chris Shaffer is being transferred by his employer from Prince George, British Columbia to Red Deer, Alberta. His airfare from Prince George to Red Deer is a deductible moving cost.

Accepted Answer

The cost of airfare for moving from one location to another due to employment relocation is considered a deductible moving expense under Canadian tax rules, provided the move meets certain criteria.

Question 7

Jim and Shirley Noonan decide to separate after ten years of marriage. They have no children. To keep the separation amiable, they decide not to involve lawyers or the courts at this stage. They have a written separation agreement in which Shirley agrees to pay Jim $500 per month until he remarries. The payments will be taxed in Jim's hands and will be deductible from Shirley's income.

Accepted Answer

This is a valid arrangement and falls within the guidelines of Canadian tax laws. It is important to note that if Jim does remarry, the payments will stop and Shirley will no longer be able to claim the deduction.

Question 8

Chris Shaffer is being transferred by his employer from Prince George, British Columbia to Red Deer, Alberta. His wife spent $750 for gas, meals, and lodging while driving their car from Prince George to Red Deer. The $750 is a deductible moving cost.

Accepted Answer

According to the Canada Revenue Agency, expenses related to moving to a new home for work may be deductible, including transportation, meals, and lodging expenses. So, the $750 spent by Chris' wife for gas, meals, and lodging while driving their car from Prince George to Red Deer would be considered a deductible moving cost.

Question 9

For purposes of deducting child care costs, an "eligible child" must be under 16 at some time during the year.

Accepted Answer

An "eligible child" for child care cost deductions must generally be under 13 years old at some time during the year, according to IRS guidelines.

Question 10

Sarah and David Johnston paid $5,500 during the year for child care for their three children, aged 3, 5, and 7. Her annual salary was $8,000 and his annual salary was $30,000. Sarah can deduct the $5,500 paid from her income.

Accepted Answer

The amount paid for child care cannot be directly deducted from income. Instead, it may qualify for a tax credit through the Child and Dependent Care Credit, which is subject to certain limits and conditions, not a direct deduction from income.

Question 11

One of your clients is a successful businessman with both a spouse and a minor child that have no income of their own. He would like to transfer some of his income into their hands for tax purposes. However, he is concerned about the income attribution rules. Provide him with three tax tips for dealing with these rules.

Accepted Answer

The answer of One of your clients is a successful...

Question 12

Chris Shaffer is being transferred by his employer from Prince George, British Columbia to Red Deer, Alberta. The Shaffers paid $1,000 in legal fees to sell their Prince George home and $800 in legal fees to buy their new home in Red Deer. The total $1,800 in legal fees is a deductible moving cost.

Accepted Answer

Legal fees related to the sale of the old home and purchase of the new home can be deducted as moving expenses.

Question 13

When a transfer is made to a spouse or common-law partner, the income attribution rules may be applicable. Briefly describe the conditions under which the income attribution rules would be applicable on such transfers.

Accepted Answer

The answer of When a transfer is made to a...

Question 14

Chris Shaffer is being transferred by his employer from Prince George, British Columbia to Red Deer, Alberta. Before moving into their new home, the Shaffers had to pay $2,000 to repair faulty wiring. The $2,000 is a deductible moving cost.

Accepted Answer

The cost of repairing faulty wiring is considered a home repair expense, not a moving expense, and is therefore not deductible as a moving cost.

Question 15

While the general rules for dealing with an individual's capital property at death require a deemed disposition and the recognition of fair market values, there are rollovers available that can eliminate or reduce the income that would be recognized on such deemed dispositions. Briefly describe these rollovers.

Accepted Answer

The answer of While the general rules for dealing with...

Question 16

The tax treatment of payments received under an annuity contract will depend on whether the annuity was purchased with after tax funds or, alternatively, from funds that are in an RRSP.

Accepted Answer

The tax treatment of payments received under an annuity contract does depend on whether the annuity was purchased with after-tax funds or from funds in an RRSP.

Question 17

The entire amount of a retiring allowance received must be included in income, even if some part of the allowance is transferred to an RRSP.

Accepted Answer

A portion of a retiring allowance can be transferred directly to a Registered Retirement Savings Plan (RRSP) without being included in income, provided the individual has the available contribution room. This allows for a tax-deferred transfer.

Question 18

Chris Shaffer is being transferred by his employer from Prince George, British Columbia to Red Deer, Alberta. All moving expenses can only be deducted from income earned in Red Deer in the year of the move. There are no carry forward provisions for moving costs.

Accepted Answer

In Canada, moving expenses can be deducted from the income earned at the new location, but if the expenses exceed the income earned in that year, the excess can be carried forward to be deducted in future years.

Question 19

If the lower income spouse was in prison for the entire year, the higher income spouse would be able to deduct child care costs during this period.

Accepted Answer

The higher income spouse can deduct child care costs during the period when the lower income spouse was in prison and unable to provide care for the child.

Question 20

The widow of Peter Toscan received a death benefit from his employer of $25,000. She must include the $25,000 in income in the year of receipt.

Accepted Answer

Generally, death benefits received from an employer due to the death of an employee are not taxable and do not need to be included in income.

Quiz 9: Other Income, Other Deductions, and Other Issues