Homework answers / question archive / Centennial College - BUSN 2843 Quiz 1 Chapter1 Canadian Tax System 1)Which of the following types of taxes is not currently in use by the federal government of Canada?   A

Centennial College - BUSN 2843 Quiz 1 Chapter1 Canadian Tax System 1)Which of the following types of taxes is not currently in use by the federal government of Canada?   A

Business

Share With

---

Centennial College - BUSN 2843

Quiz 1 Chapter1

Canadian Tax System

1)Which of the following types of taxes is not currently in use by the federal government of Canada?

 

A.            Excise Taxes

B.            Custom Duties

C.            Head Tax

D.            Transfer Tax

 

Tax Policy Concepts

2.            Which of the following statements with respect to Canadian tax policy is NOT correct?

 

A.            The economic burden of a particular tax may not fall on the same group that has the legal liability to pay the tax.

B.            Extremely high rates of tax will always encourage individuals to work harder so that they will have more after tax income.

C.            The inability to harmonize the GST in some provinces has increased the complexity of tax compliance.

D.            A progressive tax system is unfair to individuals with incomes that fluctuate significantly from year to year.

 

 

Income Tax Reference Materials

3.            Which of the following statements with respect to tax reference materials is correct?

 

A.            Income Tax Folios are a legislative source of guidance.

B.            Income Tax Regulations are gradually being replaced by Income Tax Folios.

C.            Interpretation Bulletins are gradually being replaced by Information Circulars.

D.            The Income Tax Act is the most important source of information for dealing with matters related to the federal income tax.

 

 

Liability For Tax

4.            Of the following statements related to liability for Canadian income tax, which statement is NOT correct?

 

A.            As used in the Income Tax Act, the term person refers to individuals, trusts, and corporations.

B.            Corporations must use the calendar year as their taxation year.

C.            The Canadian Part I tax is assessed on residents of Canada.

D.            The Canadian Part I tax is assessed Canadian employment income earned by a non-resident.

 

Alternative Concepts of Income

5.            Which of the following statements with respect to the relationship between accounting Net Income and Net Income For Tax Purposes is NOT correct?

 

A.            Both accounting Net Income and Net Income For Tax Purposes value many assets at their historical cost.

B.            Accounting Net Income requires that costs be matched with revenues.

C.            Net Income For Tax Purposes requires that costs be matched with revenues.

D.            Accounting Net Income is determined by applying Generally Accepted Accounting Principles.

 

 

Calculation Of Net Income For Tax Purposes

6.            With respect to the determination of Net Income For Tax Purposes, which of the following statements is correct?

 

A.            Property losses are deducted from business income before the deduction of RRSP contributions.

B.            Allowable capital losses can be deducted to the extent of other positive sources of income.

C.            If not used during the current period, all subdivision e deductions can be carried forward to subsequent periods.

D.            If a business loss exceeds all other positive sources of income, Net Income For Tax Purposes is equal to nil.

 

 

Net Income to Taxable Income

7.            Which of the following items would be deducted in converting Net Income For Tax Purposes to Taxable Income?

 

A.            A deduction for spousal support payments made during the year.

B.            A deduction for the extra costs related to living in prescribed areas of the Canadian north.

C.            Current year allowable capital losses in excess of current year taxable capital gains.

D.            Current year business losses in excess of other positive sources of income.

 

Tax Planning

8.            Which of the following items does not result in tax avoidance?

 

A.            Use of the lifetime capital gains deduction.

B.            Employer contributions to group disability plans.

C.            Employer contributions to private health care plans.

D.            Accelerated depreciation (CCA) on rental properties.

 

Canadian Tax System

9.            Which of the following is NOT a taxable entity for Canadian income tax purposes?

 

A.            Darklyn Ltd., a Canadian resident corporation.

B.            Ms. Sarah Bright, a Canadian resident.

C.            Walters and Walters, a group of CPAs operating as a partnership.

D.            The Martin family trust.

 

10.          Which of the following could be required to file a GST return?

 

A.            Chan’s Clothing Store (an unincorporated business)

B.            The Chan Foundation (a registered charity)

C.            Min Chan (an individual)

D.            All of the above could be required to file a GST return.

 

11.          Which of the following forms of taxation provides the largest component of federal government taxation revenues?

 

A.            Personal income tax

B.            Corporate income tax

C.            Goods and services tax

D.            Employment insurance premiums

 

 

12.          With respect to provincial income taxes, other than those assessed in Quebec, which of the following statements is NOT correct?

 

A.            Each province can apply different rates to as many brackets for individuals as it wishes.

B.            The federal government collects the provincial income tax for individuals for every province except Quebec.

C.            Each province can establish its own tax credits to apply against Tax Payable for individuals.

D.            Each province can establish rules for determining the Taxable Income of individuals.

 

13.          Which of the following groups of entities are all subject to taxation on income?

 

A.            Individuals, proprietorships and corporations

B.            Proprietorships, corporations and trusts

C.            Individuals, trusts and corporations

D.            Individuals, partnerships and corporations

 

14.          Income tax is calculated for which of the following groups of jurisdictions?

 

A.            Municipal, provincial, and federal

B.            Provincial, federal, and international

C.            Municipal, federal, and international

D.            Municipal, provincial, and international

 

Tax Policy Concepts

15.          Which of the following goals is NOT a current economic policy objective of the Canadian tax system?

 

A.            Ensure the continued provision of public goods

B.            Redistribute income and wealth among taxpayers

C.            Ensure fairness in the allocation of resources to different levels of government.

D.            Economic stabilization such as stimulating the economy or creating jobs.

 

16.          Which of the following can be considered an advantage of an income tax system based on progressive rates?

 

A.            A progressive rate system is simpler to administer.

B.            A progressive rate system provides greater stability in the context of changing economic conditions.

C.            A progressive system discourages tax evasion.

D.            A progressive system encourages greater effort on the part of individuals.

 

17.          Which of the following statements accurately describes a regressive tax?

 

A.            A tax which results in higher effective tax rates for higher income taxpayers.

B.            A tax which results in lower effective tax rates for higher income taxpayers.

C.            A tax in which the same effective rate applies to all levels of income.

D.            A tax that is shifted to consumers through price increases on the goods purchased.

 

18.          Which of the following statements with respect to using tax expenditures rather than program spending is NOT correct?

 

A.            It is more costly to administer tax expenditures as opposed to program spending.

B.            Tax expenditures reduce the visibility of government actions.

C.            Tax expenditures leave fewer decisions in the hands of the private sector, thereby providing for more efficient allocation of resources.

D.            Tax expenditures reduce the impact of progressive rates on higher income taxpayers.

 

 

19.          Which of the following would NOT be considered a desirable characteristic of a tax system?

 

A.            Balance between sectors.

B.            Inelasticity.

C.            Neutrality.

D.            Flexibility.

 

20.          Which of the following would be considered a desirable characteristic of an effective tax system?

 

A.            Inelasticity.

B.            Lack of international competitiveness.

C.            Simplicity.

D.            Ambiguity.

 

21.          “We should not have a tax system which encourages investment in particular assets or in specific areas of the country.”  This statement reflects which of the following qualitative characteristics of an effective tax system?

 

A.            Neutrality.

B.            Horizontal equity.

C.            Simplicity.

D.            Elasticity.

 

22.          “Taxpayers who earn $100,000 in dividends should pay the same amount of tax as taxpayers who earn $100,000 in capital gains.”  This statement reflects which of the following qualitative characteristics of an effective tax system?

 

A.            Vertical equity.

B.            Neutrality.

C.            Elasticity.

D.            Horizontal equity.

 

 

Income Tax Reference Materials

23.          With respect to the structure of the Income Tax Act, which of the following statements is correct?

 

A.            The major components of the Income Tax Act are called Divisions.

B.            The Income Tax Act has Parts numbered I through XVII, reflecting the fact that there are 17 Parts in the Act.

C.            All Parts of the Income Tax Act have Divisions.

D.            All Parts of the Income Tax Act contain at least one Section.

 

 

24.          Of the following publications, indicate the one that is NOT a legislative source.

 

A.            Income Tax Act.

B.            Income Tax Folios.

C.            Income Tax Application Rules.

D.            International Tax Treaties.

E.            Income Tax Regulations.

 

 

25.          Of the following publications, indicate the one that is NOT published by the CRA.

 

A.            Income Tax Folios.

B.            Information Circulars.

C.            Dominion Tax Cases.

D.            Income Tax Technical News.

 

 

 

26.          There are a number of common areas of litigation involving the CRA.  Indicate which type of transaction is least likely to be in dispute.

 

A.            Arm’s length versus non-arm’s length transactions.

B.            Capital versus income transactions.

C.            Unreported revenues from business transactions.

D.            Establishment of fair market value.

E.            The deductibility of farm losses against other sources of income.

 

 

27.          Where would an individual find the formula for determining the prescribed rate?

 

A.            The Income Tax Act.

B.            The Income Tax Regulations.

C.            A CRA Income Tax Folio.

D.            A CRA Information Circular.

 

28.          Which of the following statements is NOT correct?

 

A.            Most major income tax changes are introduced in the annual Federal Budget.

B.            A federal election can prevent passage of draft legislation.

C.            Proposed changes in tax law are usually introduced to parliament in the form of a Notice of Ways and Means Motion.

D.            When there is a conflict between the Canadian Income Tax Act and an international agreement, the terms of the Canadian Income Tax Act prevail.  

 

 

Liability For Tax

 

29.          An individual is liable for income tax in Canada if he:

 

A.            is a resident in Canada.

B.            is a citizen of Canada.

C.            has lived in Canada at any time during the year.

D.            All of the above are required.

 

30.          Which of the following persons is NOT liable for Canadian income tax under Part I of the Income Tax Act?

 

A.            Pheap Chom, an individual who has resided in Canada for the past 15 years.

B.            Chom Incorporated, a Canadian resident corporation.

C.            Phon Im, a resident of the United States who earns employment income in Canada.

D.            Bunly Im, a resident of the United States who earns interest income in Canada.

 

 

31.          Which of the following types of income earned by a non-resident is NOT subject to Canadian income tax under Part I of the Income Tax Act?

 

A.            Employment income earned in Canada

B.            Business income earned in Canada

C.            Rental income earned in Canada

D.            Income from the disposition of Canadian real estate

Answer:  C

Alternative Concepts of Income

32.          Which of the following statements accurately describes the Income Tax Act view of income?

 

A.            Net income is determined by adding revenue based on recognition at the point of sale and deducting expenses which are determined based on generally accepted accounting principles.

B.            Net income is determined by adding together several different types of income based on an ordering rule.

C.            Net income is the amount paid to an employee after an employer deducts CPP, EI, income taxes and any other source deductions from employee pay.

D.            Net income is the total increase in a taxpayer’s net worth for the year.

 

Calculation Of Net Income For Tax Purposes

33.          With respect to the calculation of Net Income For Tax Purposes, which of the following statements is NOT correct?

 

A.            Subdivision e deductions are subtracted from the total of all positive sources of income.

B.            Allowable capital losses for the year can only be deducted to the extent of taxable capital gains for the year.

C.            Business losses can be netted against employment income in determining the positive amounts to be included under ITA 3(a) and 3(b).

D.            Property losses can only be deducted after the subtraction of Subdivision e deductions.

 

34.

Minjie Liu has the following sources of income and deductions:

 

Employment income      $35,000

Interest income                5,000

Taxable dividend income              7,000

Taxable capital gain         5,000

Allowable capital loss     12,000

Subdivision e deductions              2,000

 

What is Minjie’s Net Income for Tax Purposes?

 

A.            $47,000

B.            $40,000

C.            $45,000

D.            $49,000

 

35.          Tanya Turek has the following sources of income and deductions:

 

Gross employment income         $35,000

Net employment income             34,000

Business loss      14,000

Taxable capital gain         4,000

Allowable capital loss     2,000

 

What is Tanya’s Net Income for Tax Purposes?

 

A.            $23,000

B.            $22,000

C.            $36,000

D.            $24,000

 

 

 

 

36.          Fadel Ghanem has the following sources of income and deductions:

 

Net employment income             34,000

Property income              6,000

Business loss      54,000

Taxable capital gain         4,000

Allowable capital loss     7,000

 

What is Fadel’s Net Income or Loss for Tax Purposes?

 

A.            $40,000 Income

B.            Nil

C.            $44,000 Income

D.            $12,000 Loss

 

 

37.          ITA 3(b) requires the taxpayer to “determine the amount, if any, by which taxable capital gains exceed allowable capital losses”.  The rule that is established by this phrase is:

 

A.            That allowable capital losses in excess of taxable capital gains during a year are never deductible from income.

B.            That the current year allowable capital losses can only be deducted to the extent that there are taxable capital gains during the current year.

C.            That taxable capital gains are only included in income in a year when there are also allowable capital losses that can be used to reduce the effect on income.

D.            That unused allowable capital losses are deductible against any type of income in one of the past 3 years or in a future year.

 

 

Net Income to Taxable Income

 

38.          Which of the following amounts is NOT deducted in converting Net Income for Tax Purposes to Taxable Income?

 

A.            Losses of other years.

B.            The lifetime capital gains deduction.

C.            An amount related to the exercise or sale of stock options.

D.            The excess of allowable capital losses over taxable capital gains for the year.

 

 

Tax Planning

39.          Providing employees with private health care benefits involves what type of tax planning?

 

A.            Tax evasion.

B.            Tax deferral.

C.            Income splitting.

D.            Tax avoidance.

 

 

40.          Making contributions to an RRSP always involves what type of tax planning?

 

A.            Tax avoidance and tax deferral.

B.            Tax deferral.

C.            Tax avoidance.

D.            Income splitting.