Reference no: EM132737524

Problem 1: Pere gifted shares in a public corporation with a fair market value of $50,000 to his 12-year-old son, Fils. After Fils received $1,000 in dividends, he sold the shares for $53,000. What are the tax effects of the dividend and the sale?

Option 1: Pere will claim the dividends on his tax return and Fils will claim the capital gain on his tax return.
Option 2: Fils will claim the dividends and a capital gain on his tax return.
Option 3: Pere will claim the dividends and a capital gain on his tax return.
Option 4: Fils will claim the dividends on his tax return and Pere will claim the capital gain on his tax return.

Problem 2: Which of the following statements is correct?

Option 1: Net income for tax purposes minus federal tax credits equals taxable income
Option 2: Taxable income minus federal tax credits equals total federal tax
Option 3: Total federal tax minus federal tax credits equals federal tax payable
Option 4: Net income for tax purposes minus federal tax credits equals federal tax payable

Problem 3: There are a number of benefits and tax advantages associated with Registered Education Savings Plans (RESPs). Which of the following is NOT a benefit or advantage?

Option 1: Contributions to the plans are deductible.
Option 2: Earnings on assets within the plan are not subject to tax.
Option 3: The government makes contributions in the form of Canada Education Savings Grants and Canada Learning Bonds.
Option 4: Distributions from the plan may be received by some recipients without incurring any additional taxation.