Question

1) Jo is a Canadian citizen. In March of 2020, Jo's employer transferred Jo to the United States. Jo's spouse and child moved with Jo at that time. Jo chose not to sell the family's home, and instead, now lends it to extended family from overseas during the winter months. Jo has five weeks of vacation each summer, at which time the family returns to Canada and stay in their house. Jo did not cancel a long-standing country club membership, nor did Jo close the family's Canadian bank accounts. Which of the following statements is true?

• Jo is a Canadian citizen, and will therefore, automatically be considered a Canadian resident for tax purposes.

• Jo no longer resides in Canada, and will therefore, automatically be considered a non-resident of Canada.

• Jo is considered a part-time resident of Canada for the five weeks that Jo and family vacation in the country.

• If Jo is considered to have a continuing state of relationship with Canada, Jo might be a resident for tax purposes.

2) Section 3(a) of the Income Tax Act includes which of the following?

• Income from: employment, property, and capital transactions.

• Income from: employment, property, business, and capital transactions.

• Income from: business, other items, and capital transactions.

• Income from: employment, property, business, and other items.

3) Regarding taxation years, which of the following statements is TRUE?

• Corporate taxpayers must use the calendar year as their taxation year.

• The taxation year for an individual taxpayer typically ends on April 30^th.

• Individual taxpayers may choose any twelve-month period as their taxation year.

• A corporation may have a taxation year less than twelve months during a year the corporation is formed, dissolved, or is granted a change in its year-end.

4) With regards to the taxation year, which of the following situations is correct?

• An individual taxpayer's taxation year ends on April 30^th.

• A corporation's taxation year is its fiscal period not exceeding 52 weeks.

• Corporations must use December 31^st as the taxation year end.

• Taxation year ends must be considered for tax planning purposes within business structures.

5) The types of income for Canadian tax purposes do not include which of the following:

• Employment Income

• Capital Gains and Losses

• Lottery Winnings

• Other Income

6) Which of the following factors is not relevant in determining if an individual was a resident of Canada?

• Their Canadian citizenship status.

• The amount of time spent in Canada on a regular basis.

• Their social and financial ties to Canada.

• Their motivation for being in Canada.

7) Generally, income is considered passive if it was realized from…

• Employment

• Business

• Property

• Capital gains

8) Which of the following events would generally result in a capital gain?

• The sale of an apartment building by a real estate construction company.

• The sale of an apartment building by a real estate rental company.

• A payment of a one-time bonus to an employee.

• The receipt of alimony from a former spouse.

9) Which entity pays tax in Canada?

• Proprietorship

• Partnership

• Joint venture

• Corporation

10) An individual received employment income of $50,000 during 2020. They owned a 50 % interest in a partnership that realized a business loss of $120,000 for the year ended December 31, 2020. They also realized a capital loss of $12,000 on the sale of shares and a capital gain of $5,000 on the sale of real estate. What would be the amounts of the capital loss and business loss available for carry forward or back to other taxation years?

• $3,500, 50% of the $7,000 net capital loss for the year.

• $60,000, their share of the partnership's loss.

• $3,500, 50% of $7,000 net capital loss for the year, and $60,000, their share of the partnership's loss.

• $3,500, 50% of the $7,000 net capital loss for the year; and $10,000, ($60,000 share of the partnership's lossless $50,000 of employment income.

11) An individual was the sole shareholder and employee of a Canadian corporation (Canco). They received employment income of $50,000 and rental income of $12,000 from Canco. Canco earned net income of $100,000, after the payment of the two amounts to the individual. What would be the individual’s income for the year?

• $50,000

• $62,000

• $162,000

• It would depend on the year end of Canco.

12) A Canadian corporation has a branch office in England. It earns CDN $1,000,000 and pays 40% UK taxes. The Canadian corporate tax rate is 25%. Why would Canada not collect taxes on the UK branch income?

• Canada taxes only Canadian sourced income of Canadian corporations.

• The UK branch would be responsible for paying Canada's share of the taxes it collects, under the terms of the tax treaty between the two countries.

• The UK tax rate is higher than the Canadian tax rate on the income.

• Canada has no right to tax the income under the terms of the tax treaty between the two countries.

13) Canada Revenue Agency (CRA) has the right to reassess a tax return…

• In the case of corporations, within four years from the date of the original notice of assessment.

• In the case of individuals and Canadian-controlled private corporations (CCPCs), within three years from the date of the original notice of assessment.

• At any time and in all circumstances for all taxpayers.

• Never, if CRA originally agrees no taxes were payable due to an overall loss being reported in the tax return.

14) The tax return filing deadline and the balance of tax due date for individuals, other than deceased individuals, is…

• June 15th of the following year.

• April 30th of the following year.

• Either April 30 or June 15 (if the individual or their spouse carries on a business,) of the following year. April 30th of the following year is the balance of tax due date in all cases.

• Either April 30 or June 15, (if the individual or their spouse carries on a business) of the following year.

15) Which of the following statements describes the treatment of losses in the aggregating formula?

• All losses, in all sections, are deductible against all sources of income.

• Losses in section 3(d) are deductible only from taxable capital gains.

• Losses in section 3(d) are deductible against all sources of income.

• Losses in section 3(b) are deductible against all sources of income.

16) Which of the following activities would not be considered business income for an individual?

• Cutting the neighbours' lawns.

• Renting out the basement apartment of their house.

• Watching over the neighbour’s pet while the neighbour was on vacation.

• Teaching piano to students, on a part-time basis.

Answer 1

1. D If Jo is considered to have a continuing state of relationship with Canada, Jo might be a resident for tax purposes.

2. D. Income from: employment, property, business, and other items.

3. D. A corporation may have a taxation year less than twelve months during a year the corporation is formed, dissolved, or is granted a change in its year-end.

4. D. Taxation year ends must be considered for tax planning purposes within business structures

5. C. Lottery Winnings