Reference no: EM132537837
Q. 1 In carrying out their engagements, which financial advisor would NOT be subject to the preparer penalty?
- George, who is preparing a tax return for Mario
- Sandra, who is providing tax advice to Frank
- Allan, who is providing financial planning advice to Joan
- Margo, who is preparing an appraisal report to be filed with the income tax returns of the partners in Sleepy Hollow Golf Course
Q.2 Which individual has successfully used the strategy of tax deferral?
- Melissa, who sold her principal residence and sheltered the entire gain by claiming the principal residence exemption
Vanessa, who purchased a new Government of Canada bond on January 4th of this year
Sarah, who decided not to report the tips she earned as a waitress
Fern, who borrowed money to invest in an equity mutual fund
Q.3 Twin Valley Corp. owns a non-controlling interest in a number of other Canadian corporations and a few government bonds. Twin Valley is a Canadian-controlled private corporation. In addition to its active business income, Twin Valley received $22,000 in dividends and $10,000 in interest from its portfolio investments. What statement is FALSE?
- Twin Valley's active business income is subject to basic Part I tax.
- The dividends that Twin Valley received from its portfolio investments are subject to a refundable Part IV tax.
- The dividends that Twin Valley received from its portfolio investments will be subject to a refundable Part I tax.
- The interest income earned by Twin Valley will be subject to total Part I tax before abatement of approximately 44.67%.
Q.4 Judith is the owner and manager of 456789 New Brunswick Ltd., a Canadian-controlled private corporation. The corporation's taxable income has never exceeded $200,000. What statement is FALSE?
- Judith could defer personal taxes by leaving after-tax income in the corporation.
- The corporation could contribute to a deferred income plan on Judith's behalf.
- Judith may be able to shelter all or part of the capital gain realized upon the sale of the business.
- If the corporation pays Judith dividends, the government will receive less in total tax than if Judith earned the business income directly.
Q.5 What item would NOT DECREASE an individual's taxable income?
- childcare expenses
- non-capital losses carried forward from a previous year
- charitable donations
- moving expenses
Q.6 Victor's employer sponsors a group life insurance plan, a group disability insurance plan and a group drug and dental plan. The employer pays the premiums for the group drug and dental plan and the life insurance plan, but deducts the premiums for the disability plan from Victor's pay. What statement is true?
- The premiums for the group life insurance plan are not a taxable benefit.
- The premiums for the group drug and dental plan are a taxable benefit.
- If Victor receives reimbursement from the dental plan for his family's dental expenses, that reimbursement will be considered taxable income.
- If Victor becomes disabled and receives payments from the group disability plan, those payments will not be taxable.
Q.7 What financial statement provides a clear picture of an individual's financial status at a point in time, and readily shows how various strategies could affect his or her situation?
- balance sheet
- statement of cash flow
- statement of lifestyle expenditures
- statement of net worth
Q.8 For an individual approaching retirement, what factor would NOT shape his or her tax profile?
- marginal tax rate during retirement
- marginal tax rate between now and retirement
- retirement objectives
- previous use of capital gains exemptions
Q.9 Conner's tax return for two years ago was supposed to be filed by April 30th of last year. Conner did not file the return until September 13th of this year. At that time, he owed $14,200 in taxes. How much of a late-filing penalty will Conner incur?
- $710
- $1,704
- $2,414
- $3,124
Q.10 Denise inherited a large lump sum of money and she decided to spread the wealth by giving $50,000 each to her husband, Adam, and her adult sister, Vickie.
Vickie invested her money in an assortment of mutual funds and last year she earned capital gains of $3,000 and interest income of $1,500. Adam used his money to set up a partnership with a long-time associate, Kevin. Both Adam and Kevin actively participate in the business and it was successful from the beginning. Adam's share of the partnership income was $67,000 last year. What was Denise's taxable income as a result of these transactions?