Reference no: EM132776874

Questions -

Q1) Walter and Beatrice have been married for 36 years. Walter works at an automobile parts manufacturer; Beatrice has not been in the workforce since she got married. In April of next year, Walter will turn 63 years of age. What statement concerning the Canada Pension Plan (CPP) is FALSE?

a) If Walter were to retire on his 63rd birthday, his monthly pension will be 88% of the pension he would be entitled to receive had he deferred collecting his CPP benefits until age 65.

b) If Walter and Beatrice were to divorce later this year, it would be mandatory for Walter to split his CPP pension credits with Beatrice based on their 36-year marriage.

c) Assume Walter retires immediately and begins collecting his CPP retirement benefit. If next year he returns to work on a part-time basis and earns $600 per month, even though he has no longer substantially ceased working, his CPP retirement benefits will nevertheless continue unaffected.

d) If Walter defers retirement and opts to continue working, he will not be required to make CPP contributions beyond age 70.

Q2) Sophia and Vincenzo are married. In 1984, the couple immigrated to Canada from Italy. At that time Sophia was 32 years old; Vincenzo was 34 years old. Other than annual vacations to Italy, the couple has resided in Canada without interruption. What statement regarding Old Age Security (OAS) benefits is true?

a) Sophia will be ineligible to receive the maximum OAS benefit if she applies at the earliest possible age.

b) Once Sophia begins receiving her OAS benefits, Vincenzo will be eligible for the Allowance as long as he is no longer working.

c) If Sophia and Vincenzo were to move back to Italy when Sophia turns 66 years of age, their OAS pensions will be halted after six months and will not be reinstated until they resume their residency in Canada.

d) For tax purposes, OAS benefits and benefits under GIS and the Allowance (if eligible to receive them) must be included as part of Sophia and Vincenzo's total income but, can subsequently be deducted from their taxable income (effectively making them tax-free).

Q3) Justin belongs to an integrated defined-benefit pension plan. It provides a benefit of 1.3% of final average earnings up to the year's maximum pensionable earnings (YMPE) in the final year and 2% on final average earnings above the YMPE in the final year for each year of service. If Justin has projected his final average earnings to be $85,000 and the YMPE in the final year to be $55,300, what annual pension benefit will he receive when he retires after 20 years of service?

a) $22,100

b) $26,258

c) $28,120

d) $34,000

Q4) At the end of last year, Simone had over-contributed $6,000 to her RRSP. Simone's new RRSP contribution room for this year is $5,000. What is the MAXIMUM amount that Simone can contribute to an RRSP this year without incurring an over-contribution penalty?

a) $0

b) $1,000

c) $3,000

d) $7,000

Q5) In 1996, Passan purchased a cottage for $70,000. Over the years, Passan has lived in the cottage for approximately four weeks each summer but, only on alternate weekends during the balance of the year. He also owned a house in the city before moving into a rented apartment. When he disposed of the house, he designated it as his principal residence from 2004 to 2011 (inclusive). If Passan sells his cottage in 2017 for $365,000, what is the MINIMUM amount on which he must pay tax due to the sale of the property?

a) $ 46,932

b) $ 93,864

c) $201,136

d) $295,000

Q6) This year, Sven opened a golf clinic structured as a sole proprietorship. For the six months the business was in operation, he recorded a net business loss of $37,500. During the winter months, Sven worked as a salaried employee at a health club. His income from the health club for this year was $19,300. Last year, Sven worked full-time at the health club and earned $44,000. What statement is true?

a) For this year, Sven can record ($18,200) as his total income on his personal income tax return (i.e. total income of negative $18,200).

b) Sven can apply to adjust his tax return for last year and carry back $18,200 in non-capital losses from this year to reduce the employment income he earned from the health club last year.

c) This year, Sven has realized an allowable business investment loss (ABIL).

d) Sven can carryforward a portion of his business loss from this year to reduce his taxable income in a future year. However, his business loss can only be used to offset future taxable capital gains.

Q7) Kurt and Magda are married and are the joint owners of KB Manufacturing Inc., a Canadian-controlled private corporation (CCPC). Kurt and Magda each hold 10,000 shares in KB Manufacturing; the cumulative unrealized capital gain on these shares is $3 million. The couple has two adult children. What statement is true?

a) Since the company is a CCPC, Kurt and Magda will not be able to claim a capital gains exemption if they dispose of their KB shares.

b) In the event either Kurt or Magda should die, the KB shares of the deceased spouse could rollover to the surviving spouse without triggering an immediate tax liability.

c) As a CCPC, Kurt and Magda can claim the small business deduction (SMABUD) on any investment income generated by KB Manufacturing.

d) If Kurt and Magda elect to transfer their KB shares to their children as of today, the couple will not incur an immediate tax liability.

Q8) Ralf is the annuitant under a non-qualifying RRIF established last year. The fair market value of the plan at the beginning of this year was $260,000. If Ralf is 68 years old, what is the MINIMUM amount he must withdraw from his RRIF before the end of this year?

a) $11,830

b) $13,728

c) $20,090

d) $22,410

Q9) In April of this year, Oscar received $75,000 in insurance death benefits when his uncle passed away. Oscar immediately donated the entire amount to the Canadian Cancer Society. In June of this year, Oscar died. His net income from employment for this year is $60,000. When filing his tax return, if Oscar's personal representative claims the maximum permissible amount for purposes of the charitable donation tax credit, what is the value of the federal tax credit to Oscar for this year?

a) $13,022

b) $16,285

c) $17,372

d) $21,722

Q10) Kyle's job as a salesman requires him to travel extensively. His compensation is based on a base salary plus commission. He also receives a number of benefits from his employer. In which instance will Kyle have a taxable benefit?

a) Kyle's employer pays $2,800 to maintain his membership in the company's group private health services plan.

b) Kyle uses the frequent flyer points he accumulated while travelling on business to get a free plane ticket for his daughter.

c) Kyle's employer contributes $2,000 to the company's defined contribution pension plan on Kyle's behalf.

d) Kyle personally pays $800 in dues to maintain his membership in a sales association. His employer reimburses this amount to Kyle.