Question 1

Jamal, his wife and two teenage children are all Canadian citizens. For the last 2 years he and his family have been living in Mexico while he works for the Mexican subsidiary of a Canadian company. Jamal still owns his house in Canada. His wife and children stay there for 2 months in the summer and he spends 4 weeks a year there. The rest of the time the house is empty as his wife visits family in Canada regularly. Jamal has no definite plans to return to Canada and loves living in Mexico. However, since his mother-in-law is very ill, it is possible that his wife will have to return to Canada for at least 6 months to nurse her mother. Which of the following statements is correct?

Accepted Answer

Jamal has been living in Mexico for the last 2 years and has no definite plans to return to Canada. He only spends 4 weeks a year in Canada and does not have any significant residential ties to Canada. Therefore, he is considered a non-resident of Canada for tax purposes.

Question 2

ITA 3(b)requires the taxpayer to "determine the amount, if any, by which taxable capital gains exceed allowable capital losses". The rule that is established by this phrase is:

Accepted Answer

ITA 3(b) requires the taxpayer to determine the amount by which taxable capital gains exceed allowable capital losses. This means that current year allowable capital losses can only be deducted to the extent that there are taxable capital gains during the current year. If there are no taxable capital gains in the current year, the allowable capital losses can be carried forward to a future tax year or carried back to the past three tax years to offset any taxable capital gains in those years. However, the current year allowable capital losses cannot be deducted against any other type of income.

Question 3

Minjie Liu has the following sources of income and deductions:  What is Minjie's Net Income for Tax Purposes?

Accepted Answer

To calculate Minjie's net income for tax purposes, we need to add up all of the income sources and then subtract any allowable deductions.

Income sources: 
- Salary: $50,000 
- Investment income: $5,000

Total income: $55,000

Deductions: 
- RRSP contribution: $4,000 
- Charitable donations: $6,000

Total deductions: $10,000

Net income for tax purposes: $55,000 - $10,000 = $45,000

Therefore, the best choice is option C.

Question 4

Which of the following factors would NOT be relevant under the Canada/U.S. tax treaty tie-breaker rules for determining the residence of an individual?

Accepted Answer

The tie-breaker rules focus on factors like permanent home, habitual abode, and citizenship, not where business income is earned.

Question 5

With respect to the determination of Net Income For Tax Purposes, which of the following statements is correct?

Accepted Answer

If a business loss exceeds all other positive sources of income, the Net Income For Tax Purposes is reduced to zero, as losses can offset other income but cannot create a negative net income for tax purposes.

Question 6

In which of the following situations is the person considered a non-resident of Canada, in 2020, for income tax purposes?

Accepted Answer

Karen Cotin has accepted a minimum two-year contract with CS Services Inc. in London, England that started on October 1, 2019. She terminated the lease on her apartment in Toronto and sold her car before moving to England. This indicates that she has sever ties with Canada and does not have plans to return in the immediate future, making her a non-resident for income tax purposes.

Question 7

All of the following statements are true, except:

Accepted Answer

An individual who immigrates to Canada during the year is considered a resident of Canada for tax purposes only from the date of their arrival, not for the full calendar year. They are required to report their worldwide income to the Canada Revenue Agency (CRA) from that date onwards, not for the entire calendar year.

Question 8

Tanya Turek has the following sources of income and deductions:  What is Tanya's Net Income for Tax Purposes?

Accepted Answer

Tanya's total income is $41,000 ($25,000 + $16,000). Her total deductions are $19,000 ($8,000 + $6,000 + $3,000 + $2,000). Subtracting her total deductions from her total income, we get her net income for tax purposes which is $22,000. Thus, the correct answer is B.

Question 9

Which of the following statements with respect to the relationship between accounting Net Income and Net Income For Tax Purposes is NOT correct?

Accepted Answer

Net Income For Tax Purposes does not require costs to be matched with revenues, as tax rules may allow for different methods of depreciation and expense deduction than those used in accounting.

Question 10

With respect to the calculation of Net Income For Tax Purposes, which of the following statements is NOT correct?

Accepted Answer

Business losses can only be netted against income from the same business, not employment income.

Question 11

Fred Hopkins has employment income of $45,000, a business loss of $14,000, capital gains of $20,000, capital losses of $12,000, and subdivision e deductions of $3,000. Fred's Net Income For Tax Purposes is equal to:

Accepted Answer

The answer of Fred Hopkins has employment income of $45,000,...

Question 12

With respect to the residency of an individual, which of the following statements is NOT correct?

Accepted Answer

It is not necessary for an individual to be a Canadian citizen to be considered a resident for tax purposes. Citizenship is not a determining factor in residency.

Question 13

Of the persons described, which one would NOT be considered a Canadian resident?

Accepted Answer

The answer of Of the persons described, which one would...

Question 14

Which of the following corporations would NOT be considered a resident of Canada?

Accepted Answer

Exeter Ltd. was incorporated in Alberta in 1956. However, it has never carried on business in Canada and its management has always been located in Montana. Therefore, it would not be considered a resident of Canada.

Question 15

Fadel Ghanem has the following sources of income and deductions:  What is Fadel's Net Income or Loss for Tax Purposes?

Accepted Answer

The answer of Fadel Ghanem has the following sources of...

Question 16

Dominique, a Canadian citizen, lives in Buffalo, NY, USA. Throughout the current year she commutes to Fort Erie, Ontario, Canada, where she is the bartender at the Cross Border Bar. She normally works 7 pm to 3 am Tuesday through Saturday. Dominique is:

Accepted Answer

Dominique is considered a non-resident for tax purposes because she lives in the United States and commutes to Canada for work. Her primary place of residence is in the U.S., not Canada, which typically defines her residency status for tax purposes.

Question 17

Vanessa moves to Germany on July 15 of the current year. She is 35 and has lived in Canada all of her life. Which one of the following best indicates Vanessa's Canadian residency status for the current year?

Accepted Answer

Vanessa is considered a part-year resident for the current year since she moved to Germany on July 15, which means she only lived in Canada for part of the year.

Question 18

Of the following individuals, who would be a resident or deemed resident of Canada for tax purposes this year? • Alex is a U.S. citizen who commutes each day to Canada for employment purposes.
• Bob is a U.S. citizen who lives in Canada during the week for employment purposes, but returns to the U.S. on weekends to the house he shares with his wife and children.
• Charles is a Canadian citizen who lived in Toronto until March of last year, at which time he left for a four year aid mission in Africa under an agreement with the Canadian International Development Agency.
• Dick is a Canadian citizen who goes to school in the U.S. for eight months of each year but returns to Canada to live with his parents each summer.

Accepted Answer

Bob, Charles, and Dick would be considered residents or deemed residents of Canada for tax purposes. Bob, because he lives in Canada for employment purposes most of the week; Charles, as his work abroad under a Canadian agency likely does not sever his residential ties with Canada; and Dick, because he maintains significant residential ties (living with his parents during the summer) and spends a substantial part of the year in Canada.

Question 19

Which of the following statements accurately describes the Income Tax Act view of income?

Accepted Answer

The Income Tax Act determines net income by aggregating various types of income, such as employment, business, and property income, following specific ordering rules.

Question 20

Of the following individuals, who would be considered a part-year resident of Canada for the current taxation year?

Accepted Answer

Ravi would be considered a part-year resident of Canada because he moved to Canada on March 1 of the current year, establishing residency partway through the year.

Quiz 1: Introduction to Federal Taxation in Canada

ITA 3(b) requires the taxpayer to "determine the amount, if any, by which taxable capital gains exceed allowable capital losses". The rule that is established by this phrase is:

Minjie Liu has the following sources of income and deductions: What is Minjie's Net Income for Tax Purposes?