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Athabasca University, Athabasca - TAXX 301 CH4

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Athabasca University, Athabasca - TAXX 301

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1)Canadian residents living in ________ qualify for special deductions that are intended to offset the high cost of living in this area.

Choose the correct answer.

A. Nova Scotia

B. Labrador

C. Toronto

D. Quebec

2. Which of the following types of payments received by an individual taxpayer are deducted in computing taxable? income?

Choose the correct answer.

A. dividends received from owning shares of a qualified small business

B. ?workers' compensation payments

C. dividends received from taxable Canadian corporations

D. fishing income

3. In which of the following situations will the spousal credit be greatest for a married? couple?

Choose the correct answer.

A. Each spouse has net income for tax purposes of ?$27,000.

B. One spouse has net income for tax purposes of ?$49,000?, while the other spouse has net income for tax purposes of? $0.

C. An individual has net income for tax purposes of ?$27,000?, and the? individual's common-law partner has net income for tax purposes of ?$27,000.

D. One spouse has net income for tax purposes of ?$43,000?, while the other spouse has net income for tax purposes of ?$12,000.

4. Brian is 72 years old and has net income for tax purposes of ?$56,000. Assume that the limitation of the age tax credit begins at ?$37,500 and that the base amount of the credit is ?$7,100. What is the age tax credit for Brian under these? assumptions?

Choose the correct answer. Round to the nearest dollar.

A. ?$649

B. ?$2,775

C. ?$0

D. ?$7,100

{[15%] [7,100 - (15%) (56,000-37,500)]} = 649

 

 

5. The basic tax? credit, spousal tax? credit, and Canada employment tax credit are all based on a credit rate of? ________ of a specified amount.

Choose the correct answer.

A. ?7%

B. ?15%

C. ?19%

D. ?10%

6. With regard to the medical expense? credit, which of the following is? correct?

Choose the correct answer.

A. The portion of the qualifying medical expenses exceeding the threshold is multiplied by the highest federal income tax rate.

B. The tax credit is calculated based on the total qualifying medical expenses incurred by a taxpayer during the calendar year.

C. Qualifying medical expenses of the? taxpayer, minor children and spouse can be included in the calculation of the tax credit but medical expenses related to the? taxpayer's dependants over the age of 18 must be excluded.

D. Total qualifying medical expenses are reduced by the lesser of? 3% of the? taxpayer's net income in the year or an indexed amount in calculating the tax credit.

7. With regard to the Old Age Security? Clawback, which of the following is? incorrect?

Choose the correct answer.

A. The Old Age Security Clawback is calculated as the lesser of the Old Age Security payments received and? 15% of the? taxpayer's net income in excess of a set threshold amount.

B. Old Age Security Clawback refers to the portion of Old Age Security benefits which must be repaid to the federal government when the? taxpayer's net income exceeds a certain threshold.

C. The Old Age Security Clawback is described in ITA? 180.2(2), which is located in Part 1 of the? Act, which is why the repayment of Old Age Security benefits are included as a deduction in the calculation of Part 1 taxes payable.

D. Old Age Security benefits received in the year are included in the computation of net? income, which is why the repayment of Old Age Security benefits are included as a deduction under? 3(c) in the calculation of net income.

8. Which of the following tax items is of most value in terms of tax savings to a? taxpayer?

Choose the correct answer.

A. a? $500 non-refundable credit against tax payable

B. a? $500 deduction against net income for tax purposes

C. a? $500 non-capital loss carry forward

D. a? $500 refundable credit against tax payable

 

 

9. Assume an individual is in the 29?% tax bracket. For this? individual, an additional ?$160 deduction allowable in calculating taxable income will reduce taxes payable by? ________. An additional ?$160 tax credit allowable will reduce taxes payable by? ________.

Choose the correct answer. ?(Round to the nearest? dollar.)

A. ?$46?, ?$160

B. ?$46?, ?$46

C. ?$160?, ?$46

D. ?$160?, ?$160

10. A taxpayer can use the lifetime capital gains deduction against? ________.

Choose the correct answer.

A. taxable capital gains from the sale of equities

B. taxable capital gains from rental real estate properties

C. any taxable capital gain

D. taxable capital gains from the sale of qualified farming property.

11. With regard to federal income tax in? Canada, ________.

Choose the correct answer.

A. all residents of Canada are subject to the same flat tax rate which changes each year as it is indexed for inflation.

B. higher rates of tax are applied to lower levels of income using regressive tax brackets.

C. higher rates of tax are applied to higher levels of income using progressive tax brackets.

D. all residents of Canada are subject to several different flat taxes depending on their personal situation.

12. With regard to refundable tax? credits, ________.

Choose the correct answer.

A. if the taxpayer does not have tax payable for the year equal to or greater than the credit? amount, the excess credit amount is lost

B. if the taxpayer does not have tax payable for the year equal to or greater than the credit? amount, the excess credit amount is carried forward

C. if the taxpayer does not have tax payable for the year equal to or greater than the credit? amount, the entire amount of the credit is carried forward to a future taxable year

D. if the taxpayer does not have tax payable for the year equal to or greater than the credit? amount, the excess amount is paid as a refund to the taxpayer

 

 

 

13. What is the maximum federal tax rate levied on an? individual's taxable income for the current taxation? year?

Choose the correct answer.

A. ?29%

B. ?26%

C. ?33%

D. ?15%

14. Which of the following does NOT accurately describe the calculation of federal tax payable for? individuals?

A. The federal tax rates are? marginal, meaning that once taxable income reaches the next tax? bracket, all of the? individual's taxable income is taxed at the higher rate.

B. The federal tax brackets are indexed to the Consumer Price Index to account for inflation.

C. Progressive tax rates are applied to brackets? (or marginal? increments) of taxable income.

D. There are currently five federal tax? brackets, with rates ranging from? 15% to? 33%.

15. The eligible dependent credit is? ______________.

A. available to all individual taxpayers supporting a wholly dependent person who lives with them

B. only available for single parents living with and supporting a child under the age of 18

C. equal to? 15% of the wholly dependent? person's income

D. most commonly claimed by single parents supporting a minor child who lives with them

16. Which of the following BEST describes the Canada Caregiver? Credit?

A. In order to qualify for the Canada Caregiver? Credit, the dependent relative must also qualify for the disability tax credit.

B. The Canada Caregiver Credit is not available to any taxpayers who have claimed the extra base amount for the spouse or eligible dependent credit.

C. The Canada Caregiver Credit is available for individual taxpayers who are supporting some related individual because of that? individual's mental or physical infirmity.

D. The Canada Caregiver Credit is available for individual taxpayers who are supporting a? parent, child, or spouse with a mental or physical infirmity.

17. Which of the following statements related to the ITA? 118(3) Pension Income Tax Credit is NOT? correct?

A. The pension income tax credit is calculated based on eligible pension? income, which specifically excludes Old Age Security and the Canada Pension? Plan, as well as certain provincial pension plans.

B. The pension income tax credit is calculated based on eligible pension? income, which includes foreign and Canadian government pension income such as the Canada Pension Plan.

C. The pension income tax credit can be transferred to a spouse or? common-law partner if the taxpayer does not have enough taxes payable to use the credit.

D. The pension income tax credit is equal to? 15% of the first? $2,000 of eligible pension income.

 

18.  The ITA? 118(10) Canada Employment Tax Credit? ____________.

A. is calculated as? 15% of the? taxpayer's employment income in the current taxation year

B. is designed to provide an incentive for independent contractors to become employees

C. is available to all individual taxpayers who have employment income in the current taxation year

D. is available to all employed and? self-employed individuals

19. Which of the following statements is NOT correct with respect to the ITA 118.01 Adoption Expenses Tax? Credit?

A. The adoption expenses tax credit is calculated as? 15% of eligible adoption expenses incurred up to an indexed base amount.

B. Eligible adoption expenses that qualify for the adoption expenses tax credit include fees paid to an adoption? agency, related travel expenses for the adoptive? parents, document translation? fees, and mandatory translation fees.

C. An? "eligible child" for purposes of the adoption expenses tax credit is a child under the age of 18 at the time that an adoption order is issued or recognized by a government in Canada in respect of the adoption of that child by that individual.

D. Where a couple? (either married or common? law) is adopting an eligible? child, the adoption expenses tax credit must be claimed by the? lower-income parent and cannot be shared.

20. The ITA 118.05 First Time Home? Buyer's Tax Credit? ______________.

A. is equal to? 15% of the first? $10,000 => $5,000 of the cost of the qualifying home

B. is available for? first-time home buyers who acquire a qualifying home in Canada during the current tax year

C. applies to an individual who will be considered a? first-time home buyer if neither the individual or their spouse or? common-law partner owned and lived in another property in the current year or any preceding taxation year.

D. is available for all taxpayers who acquire a qualifying home in Canada during the current tax year

21.  Which of the following statements regarding the calculation of the ITA 118.1 Charitable Donations Tax Credit is? correct?

A. For individuals not subject to the highest federal tax? rate, the credit is calculated as? 15% of the first? $200 of eligible gifts plus? 29% of eligible gifts in excess of? $200.

B. The credit is calculated as? 15% of total eligible gifts.

C. The amount of charitable donations eligible for the tax credit is limited to? 75% of the? taxpayer's net income for tax purposes.

D. The amount of charitable donations eligible for the tax credit is limited to the? taxpayer's net income for tax purposes in the current year

 

 

 

 

22. Which of the following medical expenses does NOT qualify for the ITA 118.2 Medical Expense Tax? Credit?

A. Amounts paid for teeth whitening procedures

B. Amounts paid for prescription eyeglasses or contact lenses

C. Amounts paid for dentures

D. Amounts paid for guide dogs and specifically trained service animals

23. Mr. Moore incurred qualifying medical expenses of? $4,528 and has net income for tax purposes of? $86,287 in the current year. Mr. Moore is single and has no dependents. Assume that the current year limitation for the medical tax credit is? $2,500. What is the medical expense tax credit for Mr. Moore under these? assumptions?

A. ?$291

B. ?$304

C. ?$2,589

D. ?$679

Qualifying Expense                                                            $4,528

Reduced by the lesser of:

• [(3%) (86,287)] = $2,589
• Threshold Maximum = $2,500                         ($2,500)

(4,528-2,500) (15%) = 304

24. With regard to the ITA 118.3 Disability Tax? Credit, which of the following statements is? correct?

A. The disability tax credit can only be transferred to a supporting related person who claimed the disabled individual for the ITA? 118(1)(b) eligible dependent credit.

B. To qualify for the disability tax? credit, the individual must have a mental or physical impairment that significantly restricts the activities of daily living which will last for at least 12 months.

C. The disability tax credit is available if a medical expense credit is claimed for a full time attendant or full time care in a nursing home.

D. The disability tax credit is calculated as? 15% of the amounts paid for attendant care or supervision related to a disabled dependent.