Reference no: EM132697003
Questions -
Q1. Katrina is 27 years old. During 2019 she receives a non-eligible dividend of $12,000 from a private company controlled by her mother. Because she has never been actively engaged in the business, has assumed no risk or contributed capital to the corporation, holds only non-voting shares, these dividends are classified as Split Income. In addition to the dividends, she has interest income of $6,000 on funds that she inherited when her grandmother passed away. Her only tax credits are the basic personal credit and the dividend tax credit. How much is her federal tax payable for the year?
A. Nil
B. 1498
C. 2398
D. 3308
E. None of the above
Q2. As defined in ITA 129(4), aggregate investment income does NOT include:
A. Foreign source property income.
B. Net capital loss carry overs deducted in the current year.
C. Net taxable capital gains.
D. Dividends from taxable Canadian companies.
E. None of the above
Q3. It is necessary for corporations to designate dividends that they pay as eligible dividends which are eligible for the enhanced gross up and dividend tax credit procedure because:
A. Some CCPCs have some portion of their income taxed at full rates while some non-CCPCs will pay dividends out of income that has been taxed at lower rates.
B. Most CCPCs have all of their income taxed at low rates, and some non-CCPCs have only income that is taxed at lower rates.
C. All companies always have some portion of their income taxed at full rates.
D. Some non-CCPCs have income taxed at lower rates.
E. None of the above
Q4. Which of the following statements with respect to the Tax On Split Income (TOSI) is correct?
A. A Specified Individual s holding of private company shares will be classified as Excluded Shares if their fair market value is equal to or greater than 10 percent of the fair market value of all of the company s shares.
B. A Specified Individual can only claim that dividends are from an Excluded Business if they are actively engaged in the business during the current taxation year.
C. Specified Individuals under the age of 18 can never claim that income received is from an Excluded Business.
D. Potential Split Income received by any Specified Individual can be an Excluded Amount, provided it is reasonable in terms of the individual s labour, capital, or risk contribution to the source business.
E. None of the above
Q5. Which of the following is NOT a requirement for a business to qualify as a qualified small business corporation?
A. At the time the shares are sold, the corporation must use all or substantially all of its assets for active business purposes in Canada.
B. More than 50 percent of the fair market value of the assets of the business must have been used for active business in the past 24 months.
C. The shares must not have been owned by a related individual in the past 24 months.
D. The shares must not have been owned by a non-related individual in the past 24 months.
E. None of the above
Q6. With respect to integration, which of the following statements is correct for 2019?
A. For integration to be effective in situations where non-eligible dividends are paid, the combined federal/provincial tax rate on corporations must be equal to 27.54 percent.
B. For integration to be effective in situations where non-eligible dividends are paid, the provincial tax rate on individuals must be 14 percent.
C. For integration to be effective in situations where eligible dividends are paid, the provincial dividend tax credit must be equal to 9/13 of the dividend gross up.
D. For integration to be effective in situations where non-eligible dividends are paid, the combined federal/provincial tax rate on corporations must be equal to 13.04 percent.
E. None of the above
Q7. The use of a corporation is most likely to result in a reduction in total taxes if:
A. The corporation is a public company earning manufacturing income.
B. The corporation is a CCPC earning dividends.
C. The corporation is a CCPC earning investment income.
D. The corporation is a CCPC earning active business income.
E. None of the above
Q8. With respect to the lifetime capital gains deduction, which of the following statements is NOT correct?
A. The deduction is only available to individuals.
B. The Cumulative Gains Limit is reduced by any CNIL balance at the end of the year.
C. The Annual Gains Limit is reduced by Allowable Business Investment Losses realized during the year.
D. The deduction is available on any disposition of shares or debt of a qualified small business corporation.
E. None of the above
Q9. Elena is 12 years old. During 2019 she earns interest of $10,500 on funds she inherited when her maternal grandfather died, as well as non-eligible dividends of $15,300 received from a CCPC that is controlled by her father. Her only tax credits are the basic personal credit and the dividend tax credit. What is the amount of her federal Tax Payable for 2019?
A. 815
B. 4218
C. 2408
D. 3983
E. None of the above