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Athabasca University, Athabasca - TAXX 301 CH3

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Athabasca University, Athabasca - TAXX 301

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1)Whether or not an individual is an employee of a company or an independent contractor is? ________.

Choose the correct answer.

A. determined by whether the individual is organized as a business

B. determined by the facts and circumstances that pertain to the case and court precedent? (i.e. court? tests)

C. determined by whether the company pays the individual as an employee or as an independent contractor

D. easily determined by the legislation and clear rules in the Income Tax Act

2. The Income Tax Act ITA 6 describes taxable benefits that are included in the calculation of employment income and? 6(1)(a) describes various fringe benefits that are taxable but also indicates which fringe benefits are not taxable. Which of the following fringe? benefits, provided by an? employer, is a taxable benefit pursuant to ITA? 6(1)(a)?

Choose the correct answer.

A. Premiums paid to a public health care plan

B. Premiums paid to a group sickness plan

C. Premiums paid to a private health care plan

D. Contributions? (made by the? employer) to a Registered Pension Plan

3. The Income Tax Act ITA 6 describes taxable benefits that are included in the calculation of employment income and? 6(1)(a) describes various fringe benefits that are taxable but also indicates which fringe benefits are not taxable. Which of the following fringe? benefits, provided by an? employer, is NOT a taxable benefit pursuant to ITA? 6(1)(a)?

Choose the correct answer.

A. Travel expenses for an? employee's spouse, who accompanies the employee on a business trip

B. Premiums paid to a public health care plan

C. Value of board and lodging in the city where the? employer's office is located

D. Premiums paid to a group sickness plan

4. The final decision of whether an individual will be treated as an employee or independent contractor of a company is made by? ________.

Please choose the correct answer.

A. the hired individual

B. the courts

C. the hiring company

D. the CRA

 

 

 

5. Which of the following fringe benefits provided by an employer will not result in a taxable benefit to an? employee?

Please choose the correct answer.

A. Interest free loan to the employee

B. An award provided to an employee after 3 years of exemplary service

C. Company car that is made available for the? employee's personal use

D. Auto allowance paid at the prescribed amount per? kilometre, for the total business? (employment) kilometres driven in a calendar year

6. Which of the following is excluded from the calculation of an? employee's net employment? income?

Choose the correct answer.

A. an? employer's contribution to a Registered Pension Plan

B. standby charge for the? employee's use of the company car

C. an? employer's contribution to public health care premiums

D. a monthly allowance of? $200 provided to an employee for incidental costs

7. Which of the following educational fringe benefits would be taxable income to the? employee?

Choose the correct answer.

A. An employer pays the costs of a cooking class for any of its employees who want to take it.

B. An employer pays the costs of a leadership skills class for its director of training.

C. An employer pays the costs of a business communications class for any of its employees who want to take it.

D. An employer pays the cost of a corporate tax update class for its tax director.

8. Which of the following fringe benefits is a? non-taxable benefit to? employees?

Choose the correct answer.

A. A? company's top salesman gets a ?$500 bonus during the year.

B. A ?$900 award is given for 3 years of service.

C. A grocery store employee gets a 25?% discount on? groceries, and this discount is available to all store employees.

D. Premiums paid to a group health and sickness plan

9. Luz works in the corporate office at? Loblaw's and receives the following during the? year:

bullet ?Salary: ?$49,000

bullet Frequent flyer miles earned on business flights purchased with a personal credit? card: 29,000 ?miles, with no cash value

bullet A? long-service (non-cash) award for five years of? service: ?$600

bullet Christmas? (cash) bonus: ?$800

bullet Value of a wedding? gift, as Luz got married in the current? year: ?$250

How much of the items are? taxable?

Choose the correct answer.

A. ?$50,650

B. ?$50,150

C. ?$49,900 (49,000+600+300)

D. ?$52,250

10. Janis works as a tire changer at Canadian Tire and receives the following during the? year:

Given the following? information, what is Janis?'s taxable income from Canadian? Tire?

bullet ?Salary: ?$38,000

bullet Uniforms? (for work) valued at ?$1,300

bullet A long service award three years of? service: ?$250

bullet Productivity award of ?$900 for being the fastest tire changer

bullet ?5% discount on? purchases, offered to all? employees, which totals ?$200 for the year

Choose the correct answer.

A. ?$40,650

B. ?$39,100

C. ?$39,350

D. ?$39,150 (38,000+250+900)

11. Diego Jones works for the Bank of Montreal. The bank provides loans to its employees at an annual interest rate of 2?%. On April 1 of the current year the bank provides Diego with an employee loan in the amount of ?$33, 000 at the annual interest rate of 2?%. The loan requires annual principal repayments of ?$3,000 on April 1 of each year. Diego makes the first annual repayment in the following year. Assume that Canada Revenue? Agency's prescribed interest rates for the current year are as? follows:

bullet Q1? (Jan. 1 to Mar.? 31) = 5?%

bullet Q2? (Apr. 1 to June? 30) = 8?%

bullet Q3? (July 1 to Sept.? 30) = 5?%

bullet Q4? (Oct. 1 to Dec.? 31) = 8?%

Calculate the taxable benefit to be included in employment income for Diego Jones in the current year. Round your answer to the nearest dollar.

Choose the correct answer.

A. ?$1,740

B. ?$2,145

C. ?$1,242

D. ?$5,940

12. If an employer provides private health care benefits to an? employee, the cost is? ________ to the employer and? ________ to the employee.

Choose the correct answer.

A. ?non-deductible, non-taxable

B. ?deductible, non-taxable

C. ?non-deductible, taxable

D. ?deductible, taxable

13. On December 1 of the current? year, Ms. Wong purchases 2,000 shares of Red Dog Ltd. under a stock option plan. Black Angus Ltd. is a public corporation. Ms. Wong provides you with the following? information:

• bullet Stock Option granted on June 1 of the prior year and Fair Market Value? (FMV) at the? "grant" date? = ?$6?/share
• bullet Option? price, offered to employees? = ?$6?/share
• bullet Stock Option exercised on Nov. 1 of the current year and FMV at the? "exercise" date? = ?$10?/share

On December 31 of the current? year, Ms. Wong continues to own the 2,000 shares of Red Dog Ltd. The FMV of the shares on December 31 is ?$16 per share and Ms. Wong anticipates the share value will continue to increase. The taxable employment benefit arising from the stock option for Ms. Wong in the current year? is:

Choose the correct answer.

A. ?$0

B. ?$8,000

C. ?$20,000

D. ?$12,000

14. ABC Company is considering paying golf membership dues for its sales employees. The employees use the golf membership more than? 50% for business purposes. The club dues? ________.

Choose the correct answer.

A. are not a taxable benefit to the employee

B. are a taxable benefit to the employee

C. are? 50% of a taxable benefit to the employee

D. cannot be paid by a company on behalf of its employees

15. When an employee is provided with a company auto that is made available for the? employee's personal use? ________.

Please choose the correct answer.

A. there is no taxable benefit to the employee

B. the taxable benefit to the employee has to be calculated each? year, based on the number of days that the auto is made available for the? employee's personal use

C. the cost of the auto is? non-deductible to the employer

D. the taxable benefit to the employee is equal to the deductible cost to the employer

16. Which of the following best describes how employee benefits can be used for tax? planning?

Choose the correct answer.

A. Employers can use arrangements in which employees receive very little salary and a large amount of benefits to successfully avoid tax.

B. Employers can provide fringe benefits to employees that are? non-taxable benefits pursuant to the Income Tax Act.

C. Benefit programs are generally created solely for tax avoidance or deferral purposes.

D. Benefit programs generally increase the taxes payable of an employer and decrease the taxes payable of employees.

17. Su Chan resides in Victoria?, BC?, and has been employed by Fields Ltd. for a number of years as its accountant.

 

Information1.

 

 

 

 

 

 

 

 

 

 

Information 2.

 

 

 

 

 

 

 

 

 

 

 

 

 Information3.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18. For a Canadian individual taxpayer who has one job and no other sources of? income, the? individual's taxable income would be? ________.

Choose the correct answer.

A. equal to the? individual's wages

B. zero

C. equal to the? individual's wages less deductions permitted

D. equal to the? individual's wages plus capital gains

19. Sam is a U.S. resident who lives in the United States and works in Canada. He earns wages from his Canadian employer and earns interest on his U.S. bank account. He has no other sources of income in the current year. His taxable income in Canadian the current year includes? ________.

Choose the correct answer.

A. interest on the bank account only

B. his wages and interest on the bank account

C. neither his wages nor interest on the bank account

D. his wages only

20. Which of the following BEST describes the tax planning opportunity related to bonus arrangements for an? employee?

A. The fact that employment income is reported on the cash basis and business income is calculated on the accrual basis allows for a deferral of? taxes, but this deferral is limited by the rules under ITA? 78(4) which states that a declared bonus is only deductible for the employer if the bonus is paid within 260 days of the? employer's year end.

B. The fact that employment income is reported on the cash basis and business income is calculated on the accrual basis allows for an unlimited deferral of taxes as a bonus will be deductible for the employer at the time it is? declared, but it will not be subject to taxes for the employee until the bonus is received.

C. The fact that employment income is reported on the accrual basis and business income is calculated on the cash basis allows for a deferral of? taxes, but this deferral is limited by the rules under ITA? 78(4).

D. The fact that employment income is reported on the cash basis and business income is calculated on the accrual basis allows for a deferral of? taxes, but this deferral is limited by the rules under ITA? 78(4) which states that a declared bonus is only deductible for the employer if the bonus is paid within 180 days of the? employer's year end.

21. Which of the following is NOT one of the criteria used to determine if there is intent for a contract of service? (employer-employee relationship) or a contract for services? (business relationship) according to? CRA's Guide RC4110? "Employee Or? Self-Employed?"

A. Ability of individual to hire assistants or subcontract services

B. ?Individual's job title and description

C. Ownership of tools and equipment required for the job

D. Opportunity for profit and financial risk of loss

 

 

 

 

22. In the current? year, Mr. Nguyen is provided with a vehicle owned by his? employer, Translux Inc. The vehicle was originally purchased by Translux Inc. five years ago for? $29,500 (including? HST). Nguyen provides you with the following? information:

Days the vehicle was available for use by Mr.? Nguyen: 275

Months the vehicle was owned by Translux? Inc.: 12

Fair market value of the vehicle in the current? year: $12,500

Total kilometres driven in the current? year: 32,000

Personal kilometres driven in the current? year: 12,000

The minimum standby charge arising from the employer owned vehicle for Mr. Nguyen in the current year? is:

A. ?$7,080

B. ?$4,247

C. ?$5,310

D. ?$2,250

23. In the current? year, Ms. Patel is provided with a vehicle leased by her? employer, Everex Ltd. The vehicle originally cost? $30,000 and was leased by Everex Ltd. in the prior? year, on a? 36-month lease term. Ms. Patel provides you with the following? information:

Days the vehicle was available for use by Ms. Patel in the current? year: 250

Days the vehicle was leased by Everex Ltd. in the current? year: 365

Fair market value of the vehicle in the current? year: $14,500

Lease payments? (including HST, excluding? insurance): $820 per month

Total kilometres driven in the current? year: 29,000

Personal kilometres driven in the current? year: 15,000

The minimum standby charge arising from the employer leased vehicle for Ms. Patel in the current year? is:

A. ?$6,560

B. ?$2,320

C. ?$3,279

D. ?$4,373

24. Susan is an auditor at a small public practice accounting? firm, Smith? & Warren? LLP, and receives the following during the? year:

?Salary: $80,000

Holiday gift? basket: $350 value

Annual membership at local? gym: $1,750 value? (Susan uses this membership for personal use? only)

Life insurance premiums paid by? employer: $1,100

Private health care insurance premiums paid by? employer: $975

In? addition, Susan incurred the following expenses during the? year, for which she was not? reimbursed:

CPA Professional Dues? (professional status is required by statute for? auditors): $1,500

Travel expenses? (incurred to perform audits of? out-of-town clients of the? firm): $950

Which of the following is the correct amount of net employment income for? Susan?

A. ?$80,400

B. ?$80,750

C. ?$79,650

D. ?$82,850

25. With regard to the taxation of allowances and reimbursements provided by an? employer, which of the following is? correct?

A. Auto allowances are always included in employment taxable benefits.

B.  Allowances that are not reasonable are included in employment taxable benefits.

C. All allowances are included in employment taxable benefits.

D. All reimbursements are included in employment taxable benefits.

26. Which of the following is not an allowed employment deduction as per ITA? 8?

A. Capital cost allowance for a laptop computer used by the employee for employment purposes

B. Annual professional membership dues where professional status is required by statute

C. Legal expenses of employee incurred to collect salary or wages

D. Employee contributions to a Registered Pension Plan

27. With respect to the ITA? 110(1)(d) or? (d.1) stock option? deduction, ________.

A. the deduction is equal to the full amount of the related stock option taxable benefit which was included in the computation of net employment income

B. the deduction is available for all employees of Canadian controlled private corporations that provide compensation in the form of stock options

C. the deduction is available for all employees of public corporations that provide compensation in the form of stock options

D. the deduction is equal to? one-half of the related stock option taxable benefit which was included in the computation of net employment income

28.  With respect to the taxation of benefits provided to a shareholder by a? corporation, such as providing an auto for the? shareholder's personal? use, ________.

Choose the correct answer.

A. the value of the benefit is excluded from the? shareholder's income and deductible by the corporation

B. the value of the benefit is included in the? shareholder's income and not deductible for the corporation

C. the value of the benefit is excluded from the? shareholder's income and not deductible for the corporation

D. the value of the benefit can be included in the? shareholder's income and deductible by the corporation