Question

Capital gains on a principal residence are not taxable.

a.

False

b.

True

While of the following statements related to interest deductibility is correct?

a.

Interest paid on a mortgage secured by a principal residence is never deductible in Canada.

b.

If an individual borrows $100,000 to invest in securities and the securities are later sold for $60,000, interest on the $100,000 will continue to be fully deductible provided the $60,000 is immediately invested in other securities.

c.

If an individual borrows in order to buy common stocks, the interest on the borrowing will only be deductible if the stocks have a long-term history of paying dividends.

d.

If an individual borrows from his employer a loan, the interest on the borrowing will be deductible if he purchases a personal car.

When there is an involuntary disposition of a depreciable asset, any resulting capital gain can be eliminated if the asset is replaced by an asset of equal or greater value, no later than the end of the first taxation year following the disposition.

a.

True

b.

False

Employment income is the salary, wages, and other remuneration, excluding gratuities, that are received by an individual during the year.

a.

False

b.

True

Which of the following statements with respect to capital gains reserves is correct?

a.

There is no limit on how many years a reserve can be deducted.

b.

The maximum capital gains reserve is equal to the ratio between the proceeds not yet collected and the total proceeds, multiplied by the capital gain.

c.

Any capital gains reserve that is deducted in the current taxation year must be added back to income in the subsequent taxation year.

d.

The maximum capital gains reserve is limited to 20 percent of the total capital gain in the first year after the sale.

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

a.

Marc is a French citizen who lives in Paris. On March 1 of the current year he begins work as a translator in Ottawa. It is a 1-year assignment.

b.

Helga had lived and worked in Canada for 10 years. She was transferred by her employer to its flagship hotel in Switzerland on March 1 of the current year for a 1-year training assignment. Her husband remained in Canada to complete his MBA.

c.

Ravi is a citizen of India, where he was born and lived until moving to Canada on March 1 of the current year with his wife and child. He was transferred by his employer to its Canadian head office.

d.

Billy Bob is a U.S. Marshall on loan to the RCMP detachment in Nunavut. It is a 9-month assignment.

Answer 1

1. True . -

According to the Canada Revenue Agency any residential property owned and occupied by you or family at any time in a given year could be designated as a principal residence. So, if you own and live in a detached or townhouse, a condominium, a cottage, a mobile home, a trailer or even a live-aboard boat, you can designate the property as your principal residence.

The designation of a property as a principal residence is a significant and important financial planning tool because the CRA allows you to shelter the profits earned on the sale of a principal residence from taxes owed.

2. B - If an individual borrows $100,000 to invest in securities and the securities are later sold for $60,000, interest on the $100,000 will continue to be fully deductible provided the $60,000 is immediately invested in other securities.

3 - True

4. - true

5 - c

6.- c