Question 1

Norman Foster filed his 2020 tax return as was required on June 15, 2021. His Notice of Assessment dated August 28, 2021, indicated that his return was accepted as filed. On March 15, 2022, he receives a Notice of Reassessment dated March 8, 2022 indicating that he owes additional taxes, as well as interest on unpaid amounts. What is the latest date for filing a notice of objection for this reassessment? Explain your answer.

Accepted Answer

The answer of Norman Foster filed his 2020 tax return...

Question 2

Nancy Forth filed her 2020 tax return as was required on April 30, 2021. Her Notice of Assessment dated May 15, 2021 indicated that her return was accepted as filed. On July 12, 2022, she receives a Notice of Reassessment dated July 2, 2022 indicating that she owes additional taxes, as well as interest on the unpaid amounts. What is the latest date for filing a notice of objection for this reassessment? Explain your answer.

Accepted Answer

The answer of Nancy Forth filed her 2020 tax return...

Question 3

Mr. James Simon has asked for your services with respect to dealing with a Notice of Reassessment requesting additional tax for the 2016 taxation year which he says he has just received. Your first interview takes place a week later, on April 25, 2020, and Mr. Simon informs you that he has had considerable difficulty with the CRA in past years and, on two occasions in the past five years, he has been required to pay penalties as well as interest.
With respect to the current reassessment, he assures you that he has complied with the law and that there is a misunderstanding on the part of the assessor. After listening to him describe the situation, you decide it is likely that his analysis of the situation is correct.
Required: Indicate what additional information should be obtained during the interview with Mr. Simon and what steps should be taken if you decide to accept him as a client.

Accepted Answer

The answer of Mr. James Simon has asked for your...

Question 4

For the taxation year ending December 31, 2018, a corporation's combined federal and provincial Tax Payable is $57,600. The corresponding figure for 2019 is $67,900. For the year ending December 31, 2020, it is estimated that combined federal and provincial Tax Payable will be $62,900.
Case One
The taxpayer is a publicly traded corporation.
Case Two
The taxpayer is a publicly traded corporation. Assume that its combined federal and provincial taxes payable for the year ending December 31, 2019 were $61,400, instead of the $67,900 given in the problem.
Case Three
The taxpayer is a small CCPC.
Case Four
The taxpayer is a small CCPC. Assume that its combined federal and provincial taxes payable for the year ending December 31, 2019 were $61,400, instead of the $67,900 given in the problem.
Required: For each of the preceding independent Cases, provide the following information:
1. Indicate whether instalments are required during 2020. Provide a brief explanation of your conclusion.
2. Calculate the amount of instalments that would be required under each of the acceptable methods available.
3. Indicate which of the available methods would best serve to minimize instalment payments during 2020. If instalments must be paid, indicate the dates on which they are due.

Accepted Answer

The answer of For the taxation year ending December 31,...

Question 5

For each of the following independent cases, indicate whether you believe any penalty would be assessed under ITA 163.2 on any of the parties involved. Explain your conclusion.
Case 1
In preparing a tax return for one of his established clients, an accountant relies on the financial statements that another accountant has prepared for the client's business income. Nothing in these statements seemed unreasonable.
On audit, the CRA finds that the business income financial statements prepared by the other accountant contained material misrepresentations.
Case 2
An accountant is asked to prepare tax return for a new client. The accountant had no previous acquaintance with the individual.
The client provides statements, prepared using the appropriate tax figures, showing a net business income of $45,000. He has no other income. He indicates that, during the current year, he made a $32,000 contribution to a registered Canadian charity, but has lost the receipt and has requested a duplicate. As it is now April 29, in order to avoid a late filing penalty, the accountant e-files the tax return, claiming a tax credit for the contribution without seeing the receipt.
Case 3
An accountant has been engaged by a new client to use his records to prepare an income statement and to use the information in this statement to prepare a tax return. As part of this engagement, the accountant reviews both the expense and revenue information that has been provided to him by the new client. He finds revenues of $285,000 and expenses of $201,000. The information used to arrive at these figures seems reasonable and, given this, the accountant files the required tax return.
When the client is audited, the CRA finds a large proportion of the expenses claimed cannot be substantiated by adequate documentation and may not have been incurred. Furthermore, it appears that the client has a substantial amount of unreported revenues.
Case 4
An accountant who lives in an expensive neighbourhood notices that the house next door has just been sold. It was listed for $1 million. The accountant introduces himself to the new neighbour and they become friends.
At tax time the friend hires the accountant to prepare his return. The accountant is given a T4 with $25,000 in income reported. Thinking that the gross income is on the low side, the accountant asks if this is all the income he has and the friend replies that it is so. The accountant is still not satisfied with the answer as the income seems to be out of proportion with the living standard of the friend, so he then asks him if he has received money from any source other than his employment and the friend replies that he received a substantial inheritance from his mother last year.
The accountant does not ask any further questions and prepares and files the return. When the friend is audited it is discovered that he has over $200,000 in unreported income.
Case 5
Units in a new limited partnership tax shelter are being sold by a company. The company has established this limited partnership by acquiring a software application in the open market for $100,000. However, the prospectus prepared by the company states that the fair market value of the application is $5,000,000, a value that was supported by an independent appraiser. The tax shelter is registered with the CRA and is available as an investment opportunity in the current year.
On audit, the CRA determines that the $100,000 that was paid for the software application is, in fact, its fair market value on the date of the transfer. In discussing the matter with the independent appraiser, the CRA finds that the appraisal was not prepared using normal valuation procedures. In addition, the appraiser based his work entirely on assumptions and facts that were provided by the company. The appraiser was paid $50,000 for his work.
Case 6 (Requires Basic GST/HST Knowledge)
An accountant is asked to file a HST return for a client who has not kept records of the HST paid or payable on her business purchases for the year. However, the client does have financial statements for her business which, after a brief review, the accountant finds to be reasonable.
In his review, the accountant found that these statements contain large amounts for wages and interest expense, as well as a significant amount of purchases that are zero-rated. (HST is not paid on any of these types of expenses). In preparing the HST return, the accountant applies a factor of 13/113 to all of the expenses shown in the income statement. This results in an overstatement of input tax credits reported on the HST return.

Accepted Answer

The answer of For each of the following independent cases,...

Question 6

The taxation year end for Breyson Ltd. is June 30, 2020. It is a Canadian controlled private corporation that claims the small business deduction and had Taxable Income for the year ending June 30, 2019 of $132,000. Indicate the date on which the corporate tax return for the year ending June 30, 2020 must be filed, as well as the date on which any final payment of taxes is due.

Accepted Answer

The answer of The taxation year end for Breyson Ltd....

Question 7

For the three years ending December 31, 2018 through December 31, 2020, a corporation's combined federal and provincial Tax Payable is as follows:  Case One
The taxpayer is a small CCPC.
Case Two
The taxpayer is a small CCPC. Assume that its combined federal and provincial taxes payable for the year ending December 31, 2019 were $163,420, instead of the $186,540 given in the problem.
Case Three
The taxpayer is a publicly traded corporation.
Case Four
The taxpayer is a publicly traded corporation. Assume that its combined federal and provincial taxes payable for the year ending December 31, 2019 were $163,420, instead of the $186,540 given in the problem.
Required: For each of the preceding independent Cases, provide the following information:
1. Indicate whether instalments are required during 2020. Provide a brief explanation of your conclusion.
2. Calculate the amount of instalments that would be required under each of the acceptable methods available.
3. Indicate which of the available methods would best serve to minimize instalment payments.

Accepted Answer

The answer of For the three years ending December 31,...

Question 8

For both tax and accounting purposes Ledux Inc. has a January 31 year end. Ledux is a publicly traded Canadian company.
For the year ending January 31, 2018, Ledux Inc. had federal Tax Payable of $193,420. During the following year ending January 31, 2019, the federal Tax Payable was $215,567. While final figures are not available at this time, it is estimated that federal Tax Payable for the year ending January 31, 2020 will be $203,345.
Required:
A. Calculate the instalment payments that are required for the year ending January 31, 2020 under each of the alternative methods available. Indicate which of the alternatives would be preferable.
B. If the Company did not make any instalment payments towards its 2020 taxes payable, and did not file its corporate tax return or pay its taxes payable on time, indicate how the interest and penalty amounts assessed against it would be determined (a detailed calculation is not required).

Accepted Answer

The answer of For both tax and accounting purposes Ledux...

Question 9

For the three years ending December 31, 2020, Gloria Sloan had combined federal and provincial Tax Payable as follows:  Using this information consider the following three independent cases.  Required:
A. For each of the three cases:
• indicate whether instalments are required for the 2020 taxation year. Show all of the calculations required to make this decision;
• in those cases where instalments are required, indicate the amount of the instalments that would be required under the approach used in the CRA's instalment reminder; and
• in those cases where you have calculated the instalments required under the CRA's instalment reminder, indicate whether you believe there is a better approach and calculate the required instalments under that approach.
B. For those Cases where instalments are required, indicate the dates on which the payments will be due.

Accepted Answer

The answer of For the three years ending December 31,...

Question 10

In the three independent cases which follow, assume that Barry Levenor's combined federal and provincial Tax Payable is as follows:  Required:
A. For each of the three cases:
• indicate whether instalments are required for the 2020 taxation year;
• in those Cases where instalments are required, calculate the amount of the instalments that would be required under each of the three acceptable methods; and
• in those cases where instalments are required, indicate which of the three acceptable methods would be the best alternative.
B. For those Cases where instalments are required, indicate the dates on which the payments will be due.

Accepted Answer

The answer of In the three independent cases which follow,...

Question 11

For 2018, Mr. Mason Boardman has combined federal and provincial Tax Payable of $62,350. For this year, his employer withheld $61,600.
For 2019, his combined federal and provincial Tax Payable is $29,760. For this year, his employer withheld $13,740.
For 2020, he anticipates having combined federal and provincial Tax Payable of $52,370. He expects that his employer will withhold $47,390.
In January, 2020, you are asked to provide tax advice to Mr. Boardman. He has asked you whether it will be necessary for him to pay instalments in 2020 and, if so, what the minimum amounts that should be paid are, along with the dates on which these amounts are due.
Required: Provide the information requested by Mr. Boardman. Show all your calculations.

Accepted Answer

The answer of For 2018, Mr. Mason Boardman has combined...

Question 12

For the three years ending December 31, 2020, Galina Skurnick's combined federal and
provincial taxes payable are as follows:  Assume Ms. Skurnick's employer withholds combined federal and provincial taxes for each year as follows:  Required: For each of the preceding independent Cases, calculate the minimum instalment payments that are required to be made towards the settlement of the taxes payable for the year ending December 31, 2020. Show all required calculations.
If instalments must be paid, your answer should include the date that each instalment is due.
Note that, in answering this question, you should state a conclusion on whether or not instalments are required, even if the amount of the instalments is nil.

Accepted Answer

The answer of For the three years ending December 31,...

Quiz 2: Procedures and Administration