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Grant MacEwan University - ACCT 328 Chapter 1

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Grant MacEwan University - ACCT 328

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1)involves structuring transactions to reduce the tax liability of the taxpayer consistent with the intent of the income tax legislation.

Choose the correct answer.

A.

Tax fraud

B.

Tax avoidance

C.

Tax planning

Your answer is correct.

D.

Tax evasion

 

2. Carl works for Sam. Sam pays Carl entirely in cash and does not issue any tax reporting documents to? Carl, although both know they are supposed to submit reporting documentation. Carl does not file an income tax return. Carl and Sam are engaging in? ________.

Choose the correct answer.

A.

tax avoidance

B.

tax planning

C.

tax evasion

Your answer is correct.

D.

tax collection

 

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3. A transaction? (or series of? transactions) that results in a tax benefit and has no other bona fide purpose is? ________.

Choose the correct answer.

A.

a tax shelter

B.

effective tax planning

C.

a general? anti-avoidance rule? (GAAR)

D.

an avoidance transaction

 

4. The largest single source of revenue for the Canadian government is? ________.

Choose the correct answer.

A.

personal property tax

B.

goods and services tax

C.

personal income tax

Your answer is correct.

D.

corporate income tax

 

5. Which of the following taxes combines both federal and provincial sales taxes into a tax? levy?

Choose the correct answer.

A.

Harmonized Sales Tax? (HST)

B.

Goods and Services Tax? (GST)

C.

Combined Sales Tax? (CST)

D.

Provincial Sales Tax? (PST)

 

6. Which of the following? elements, within the organization and structure of the Income Tax? Act, refers to a subparagraph of the Income Tax? Act?

Choose the correct answer.

A.

lowercase letter in parentheses

B.

uppercase Roman numeral

C.

Arabic numeral

D.

lowercase Roman numeral in parentheses

 

7. Canadian individual income tax is an example of? a(n) ________ tax system.

Choose the correct answer.

A.

progressive

B.

aggressive

C.

regressive

D.

flat

 

8. The primary purpose for the federal government to collect tax revenues is to? ________.

Choose the correct answer.

A.

provide funding for provincial and territorial government units

B.

encourage economic expansion

C.

redistribute wealth from the wealthy to the poor

D.

provide public goods and services

 

9. Which of the following taxes is inherently a regressive tax? system?

Choose the correct answer.

A.

property tax

B.

sales tax

C.

federal individual income tax

D.

provincial individual income tax

 

10. Consider the following scenario. Diane has taxable income of $350, 000

and income taxes payable of $ 35,000. June has taxable income of $80,000

and taxes payable of $8,000. This scenario represents which type of tax? system?

Choose the correct answer.

A.

progressive

B.

regressive

C.

flat

D.

GST

 

11. Income Tax Regulations? ________.

Choose the correct answer.

A.

are established to provide specific details and procedural requirements necessary to enforce the Income Tax Act

B.

are established to adjust or change income tax rates on an annual basis

C.

are additions to the Income Tax Act that have not yet been passed into law

D.

are proposed changes to the Income Tax Act that are scheduled to be voted on

 

12. Division? ________ of the Income Tax Act deals with computing the net income for a taxpayer resident in Canada.

Choose the correct answer.

A.D

B.C

C.A

D. B

 

13. Administrative or informative guides that can assist with filing an individual income tax return can be found? ________.

Choose the correct answer.

A.

on Canada Revenue? Agency's website

B.

within the Income Tax Act

C.

within the Income Tax Regulations

D.

within the narrative of court cases

 

14. CRA publications can best be described as? ________.

Choose the correct answer.

A.

established precedents for how a court will decide a tax case

B.

helpful interpretations of how the Income Tax Act applies to? real-life scenarios;? however, these interpretations do not have the force of law

C.

internal government documents that are not intended for the public

D.

extensions of the Income Tax Act that have the force of law

 

15. If a Canadian taxpayer is unsure of the income tax consequences of a proposed? transaction, he or she may choose to pay a fee for the CRA to issue? a(n) ________.

Choose the correct answer.

A.

Information Circular

B.

Interpretation Bulletin

C.

Income Tax Folio

D.

Advance Income Tax Ruling

 

16. Section 3 of the Income Tax Act? describes:

Choose the correct answer.

A.

the liability for income tax for residents of Canada

B.

the computation of Net Income for a taxpayer for the current year

C.

the computation of Taxable Income for a taxpayer for the current year

D.

the liability for income tax for? non-residents earning Canadian income

 

17. A Taxable Capital Gain is defined? as:

Choose the correct answer.

A.

Taxable Capital Gains minus? 50% of Capital Losses in a taxation year

B.

Capital Gains minus Capital Losses realized in a taxation year

C.

?50% of a Capital Gain realized in a taxation year

D.

Taxable Capital Gains minus Allowable Capital Losses in a taxation year

 

18. When the Income Tax Act refers to a? person, it refers to? ________.

Choose the correct answer.

A.

an individual? person, corporation, or a trust

B.

an individual? person, partnership, or corporation

C.

a? corporation, partnership, or trust

D.

an individual person

 

19. If a Canadian citizen is subject to taxes as a resident of Canada and as a resident in another? country, most often? _______________.

Choose the correct answer.

A.

the Canadian Income Tax Act will determine the? individual's residency

B.

he or she will be subject to double taxation on his or her worldwide income

C.

international tax treaties will determine the? individual's residency

D.

the taxpayer? can't choose which country he or she wants to claim residency for tax purposes

 

20. Whether an individual is a resident or? non-resident for Canadian tax purposes? ________.

Choose the correct answer.

A.

is not easily determined for all individuals

B.

is determined solely on the basis of where an individual lives

C.

is determined by the? individual's citizenship

D.

is clearly defined in ITA 250 in the Income Tax Act

 

 

 

21. Sam is an individual who is a Canadian citizen. On July 1 of the current? year, Sam moves to Mexico. He sells his Canadian? home, drives his car to? Mexico, rents an apartment in Mexico? City, and commences employment in Mexico. Sam is single and does not have any dependents or a? spouse, and at the time he leaves? Canada, he does not have any intent to return to Canada to live. What type of Canadian taxpayer will Sam be for the current? year?

Choose the correct answer.

A.

?part-year/part-time resident

B.

resident

C.

?non-resident

D.

resident abroad

 

22. Regarding the taxation of? non-residents in? Canada, ________.

Choose the correct answer.

A.

?non-residents are never subject to Canadian tax

B.

?non-residents are only subject to tax in Canada on employment income earned in Canada

C.

?non-residents are subject to tax on certain sources of income earned in Canada

D.

?non-residents who are employed in Canada are taxed on the same income as residents of Canada

 

23. David is a French citizen who comes to Canada to attend a Canadian university. He also works part time during his stay in Canada. He arrives in Canada on May 1 of the current year and departs to return to France on February 1 of the following year. David never intended to stay in Canada permanently and is treated as a resident of France in the both the current and following years. What is? David's residency? status, for tax? purposes, in Canada in the current? year?

Choose the correct answer.

A.

as a? part-year resident

B.

as a? non-resident

C.

as a resident

D.

as a resident alien

 

24. Mark is a U.S. resident who lives in Minnesota and who owns a second home in Winnipeg. His only income consists of wages from his U.S. employer. The second home is used only by Mark and his? family, and he does not rent it out for any portion of the year. Given these?circumstances, Mark is subject to Canadian taxes? ________.

Choose the correct answer.

A.

each year he owns the second home

B.

only if he becomes a permanent Canadian resident

C.

in the year he sells the second home for a profit

D.

on any income he earns while staying at the second home

 

25. Individual taxpayers are considered Canadian residents if? ________.

Choose the correct answer.

A.

they maintain primary residential ties in? Canada, whether they live in Canada or abroad

B.

they have ever filed a Canadian resident tax return

C.

they invest in the Canadian stock market or conduct business in Canadian dollars

D.

they are Canadian citizens

 

26. Determining residency applies to? ________.

Choose the correct answer.

A.

individuals only

B.

individuals and trusts

C.

?individuals, corporations, and trusts

D.

individuals and corporations

 

27. As ITA? 3(b) indicates Taxable Capital Gains exceed Allowable Capital? Losses, which of the following statements is correct in the calculation of Net Income for tax purposes in a? year?

Choose the correct answer.

A.

The net amount reported under? 3(b) does not apply in the computation of net income for a year

B.

The net amount reported under? 3(b) cannot be zero

C.

The net amount reported under? 3(b) cannot be a positive amount

D.

The net amount reported under? 3(b) cannot be a negative amount

 

28. How is the collection of corporate income taxes? handled?

Choose the correct answer.

A.

Canada Revenue Agency collects both federal and ALL provincial income taxes.

B.

Canada Revenue Agency collects federal taxes and each province collects provincial income taxes.

C.

Canada Revenue Agency collects federal and MOST provincial income taxes.

D.

The applicable provincial finance and revenue agency collects both federal and provincial income taxes for corporations operating within the province.

 

29. If a taxpayer is unsure how to treat a particular transaction on his or her income tax? return, the taxpayer could look to? ________ to determine if a precedent has been established for the same or similar transactions.

Choose the correct answer.

A.

draft legislation

B.

court decisions

C.

advance income tax rulings

D.

international tax treaties

 

30. Publications that are currently issued by the CRA to provide detailed information about specific topics within the Income Tax Act are called? ________.

Choose the correct answer.

A.

Income Tax Technical News

B.

Technical Interpretations

C.

Electronic Libraries

D.

Income Tax Folios

 

31. The forms that are required to file an income tax return can be found? ________.

Choose the correct answer.

A.

within Income Tax Regulations

B.

at municipal courthouses

C.

within the Income Tax Act

D.

on the? CRA's website

 

 

32. A primary purpose of international tax treaties is to? ________.

Choose the correct answer.

A.

establish diplomatic relations between Canada and other countries

B.

encourage companies to establish international operations

C.

allow companies to operate? tax-free outside of their home country

D.

eliminate double taxation on the same income of a company

 

 

33. The entities that are subject to income tax in Canada consist of? ________.

Choose the correct answer.

A.

?individuals, corporations, and partnerships

B.

?individuals, corporations, and estates

C.

?corporations, trusts, and estates

D.

?individuals, corporations, and trusts

 

34. Corporate income taxes are imposed by? ________.

Choose the correct answer.

A.

ONLY provincial governments

B.

the federal government and ALL provincial governments

C.

the federal government and SOME provincial governments

D.

ONLY the federal government

 

35.Corporate income taxes in Canada are generally intended to be a? ________ system.

Choose the correct answer.

A.

flat tax

B.

progressive

C.

single payer

D.

Regressive

 

 

36. Which of the following underlying objectives of the income tax system in Canada ensures that taxpayers in similar scenarios are subject to similar amounts of income tax while taxpayers in different scenarios pay different amounts of income? tax?

Choose the correct answer.

A.

Neutrality

B.

International Competitiveness

C.

Equity

D.

Simplicity

 

37. The main objective behind taxing the income of corporations in Canada is? ________.

Choose the correct answer.

A.

to deter the corporations from accumulating large profits without distributing them

B.

to? re-allocate funds from large corporations to Canadian citizens

C.

to provide funding for the Canadian government

D.

to discourage corporations from becoming excessively profitable

 

 

 

?38. ________ is/are intended to provide operational details for administration of the Income Tax Act.

Choose the correct answer.

A.

Income tax regulations

B.

Court decisions

C.

Draft legislation

D.

International tax treaties

 

39. Of the? following, which is the lowest level in the organizational format of the Income Tax? Act?

Choose the correct answer.

A.

Division

B.

Subparagraph

C.

Subsection

D.

Subclause

 

40. Which of the following persons would be subject to tax in? Canada?

Choose the correct answer.

A.

a US corporation that employs Canadian citizens to work in its US facility

B.

a former Canadian citizen who has surrendered his citizenship and lived in the US for 5 years

C.

a US citizen who visits Canada on vacation

D.

a US corporation that has a distribution facility located in Canada

 

 

41. The charging provision of the ITA deals with? ________.

Choose the correct answer.

A.

when a? taxpayer's taxes payable are due

B.

what amount of a? taxpayer's income is subject to tax

C.

who is liable for payment of Canadian taxes

D.

the amount of tax a taxpayer owes

 

42. Which of the following factors is MOST important when determining the residency of a corporation for Canadian tax? purposes?

Choose the correct answer.

A.

The location in which the highest level of decision making for the corporation takes place.

B.

Whether or not a tax treaty exists with the other countries that the corporation has operations in.

C.

The residence of the CEO and board of directors of the corporation.

D.

The? corporation's country of incorporation.

43. How is the residence of a company that is incorporated in Canada after April? 27, 1965? determined?

Choose the correct answer.

A.

The company is deemed to be a resident of? Canada, and a? non-resident of any other countries within which it operates.

B.

The company is deemed to be a resident of? Canada, and can also be a resident or? non-resident of other countries within which it operates.

C.

The company is deemed to be a resident of whatever country its headquarters and upper management is located within.

D.

The company is deemed to be a resident of Canada so long as any of its shareholders are Canadian residents.

 

44. The tax year for a corporation is? ________.

Choose the correct answer.

A.

the calendar year

B.

a fiscal period not longer than 53 weeks chosen by the corporation

C.

a fiscal period of any length chosen by the corporation

D.

any 12 month period of the? corporation's choosing

 

45. Which of the following BEST describes the general nature of a? corporation's residence?

Choose the correct answer.

A.

Residence is primarily determined based on tax treaties that exist among countries within which a corporation does business.

B.

Residence is primarily determined based on the country of incorporation and which country the corporation desires to be a resident of.

C.

Residence is a subjective test based on the particulars of a? corporation's operations, and is not easily manipulated.

D.

Whether or not a company is a Canadian resident is easily determined by applying the rules within the ITA.

 

46. Under section 3 of the? ITA, the first step in determining a? corporation's net income is? ________.

Choose the correct answer.

A.

adding all positive sources of income

B.

netting all positive and negative sources of income

C.

netting allowable capital losses against other sources of income

D.

determining the excess of taxable capital gains over allowable capital losses

 

 

47. When computing Net Income for Tax? Purposes, which of the following loss types are deductible against any type of income of a? corporation?

Choose the correct answer.

A.

current year allowable business investment losses

B.

employment loss carry overs

C.

current year business losses

D.

property loss carry overs

 

48. BMO Financial Group is a Canadian resident corporation that also operates in the US. With respect to taxation of the income of BMO Financial? group, it will? ________.

Choose the correct answer.

A.

will NOT be subject to Canadian taxation on any of its income

B.

be subject to Canadian taxation on its worldwide income

 

C.

be subject to Canadian taxation on its Canadian and US? income, but NOT on income from other global operations

D.

be subject to Canadian taxation only on its income from sources within Canada

 

49. The US? company, Walmart, is a resident of the US and also has stores in Canada. How is the corporate income of Walmart taxed in? Canada?

Choose the correct answer.

A.

The income Walmart derives from its Canadian operations is subject to Canadian taxation.

B.

The worldwide income of Walmart is subject to Canadian taxation.

C.

The income Walmart derives from its US and Canadian operations is subject to Canadian taxation.

D.

None of? Walmart's income is subject to Canadian taxation.

 

50. Corporations that are? non-residents of Canada are required to file a Canadian income tax return if they? ________.

Choose the correct answer.

A.

have any Canadian resident shareholders

B.

generate any revenues from operations within Canada

C.

have any income from sources within Canada

D.

have Tax Payable under Part I of the Income Tax Act