Tax System
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Gold Star questions
100
If GST is considered to be a regressive tax, Federal and Provincial taxes are considered to be a _______ tax system.
If GST is considered to be a regressive tax, Federal and Provincial taxes are considered to be a Progressive tax system.
100
What's the difference between a tax credit and a tax deduction?
Deduction will reduce taxable income (x tax rate)
tax credit is a deduction in taxes payable
100
What factors have the courts considered in relation to determining employment vs. self employed income?
Basic factor is intent
- Employee vs employer relationship
Other considerations - Control – how much control do you have over your job?
- Showing up for work – are times dictated
- Where the job needs to be done – do I have to do it at their office?
- Can you say no to the job / pick what you do
- Ownership of tools – typically employees are supplied with tools
- Ability to subcontract / hire assistants
- Financial risk – do I have the risk of profit or loss? Do I just get a salary regardless of how busy I am
- Responsibility for investment and management
- Surplus amounts within the company, who manages it?
CRA looks at the totality of all the evidence to determine
100
Who is this?
Boris Johnson
100
Allowable Capital losses can be carried back ____ years and carried forward _____ years.
Allowable Capital losses can be carried back 3 years and carried forward indefinitely and only used against taxable capital gains
200
Name 3 problems with our Federal tax system:
Problems with the progressive tax system:
- Complexity – many rules and there’s an effort to get into lower brackets
- Income fluctuations – yr.1, $1M then zero next 3 years pays more in tax than $250K/yr
- Family unit problems – one spouse earns $200K pays more tax than household with $100K each
- Economic growth - can limit economic growth
- Tax concessions – higher income individuals can lobby for better tax breaks
- Tax avoidance and evasion – promotes less reporting of income. Tax avoidance = tax planning, evasion = illegal
- Reduced tax revenues
200
Paula give a $2,000 donation to the Green Party of Canada. What is the max political credit she can claim?
3/4 (75%) First $400
½ (50%) Next $350
1/3 (33%) Next $525
Max = $650 For max $1,275 donations
200
An employer gives an interest free loan to an employee to purchase a house. Are there any tax consequences with this transaction?
Yes, interest benefit up to the prescribed CRA rate must be added to income.
200
What is this Character's name from the show "Suits"
Mike Ross
200
What 4 counselling fees are legislative exceptions as a taxable benefit?
- Counselling – Re: Mental Or Physical Health
- Counselling – Re: Re-Employment Or Retirement
300
What are some of the qualitative characteristics of a good tax system?
Qualitative characteristics of a tax system
- Equity or fairness – Horizontal fairness = same income individuals are taxes at the same rates, vertical equity = if you make more you should be taxes more
- Neutrality – the tax system aims to not pose barriers on economic decisions
- Adequacy – good tax system should meet financial needs of the government
- Elasticity – tax revenues should be meet changes in economic conditions w/o changing rates
- Flexibility – should be easy to change depending on the economic conditions
- Simplicity / easy of compliance – should be easy to use and comply
- Certainty – should be able to know how much tax you need to collect.
- Balance between sectors – good tax system isn’t reliant solely on individuals or businesses
- International competitiveness – needs to be about equal to other countries or people will leave
300
To arrive at Taxable income, there are 6 deductions available to individuals. They are:
Employee Stock Options
Deductions For Payments (Workers comp, social assistance)
Lump Sum Payments
Lifetime Capital Gains Deduction
Northern Residents Deductions
Loss Carry Overs
300
Rent, Interest and Dividends are considered what kind of income?
Property Income
300
Where is this famous fountain located?
Trevi Fountain, Rome Italy
300
What does GAAR stand for and how is it used?
GAAR – general anti avoidance rules – it says that if you are doing a series of transactions with the purpose of avoiding taxes, the CRA will deny you the benefit.
GAAR has not been all the effective b/c the taxpayer has stipulated that there were other bona fide business reasons for the transactions not solely to avoid taxes
400
You must file a tax return if you have any of the following (5 requirements)
Must file if:
- They have a balance owing at the end of the year
- They have been requested by the CRA to do so
- Have a capital gain/loss or disposed of a capital property (with no G/L)
- Have elected to split income with spouse
- Have to contribute additional amounts to CPP or EI
400
Joe is not married and has 2 children, one of whom is blind. What tax credits could be available for Joe to claim?
BPA
Eligible dependent
Canada Caregiver for Infirmed Child Under the age of 18
Disability credit and supplement
Medical
400
A car is purchased for $45,000 (Class 10.1 - 30%) on November 28th. The company year end is December 31. How much CCA can be claimed and what would be the ending UCC balance?
$30,000 + $15,000 (AACII) = $45,000 x 30% = $13,500
Ending UCC would be $16,500 ($45,000 - $15,000 AACII - $13,500 CCA)
400
What company has this logo?
Chanel
400
Your employer provides you with a company car and pays $10,000 a year for all expenses relating to this car. You drive the car to and from work on a continuous basis. From a tax perspective, is there a benefit that needs to be added to your employment income?
Yes, standby charge and operating benefit
Standby Charge
A x [ (2% x C x D) + 2/3 (E-F) ]
B
A = Number of personal kilometers driven during the year (need a log)
B = 1,667 x number of months that the car is available for use by the employee (simplified formula – actual formula is based on days)
C = Original purchase price of the vehicle
D = Number of months that the car is available for use by the employee
E = The lease payments for the period of time that the car was available to the employee. – so total lease payments
F= Any insurance costs included in the lease payments (b/c insurance is considered operating benefit)
The operating benefit is equal to the lesser of:
The number of personal kms driven x $.28 ($0.27 is the 2021 rate)
One half of the standby charge
500
Mrs. Smith dies March 6th, 2020. When must her 2019 & 2020 tax returns be filled?
2019 – likely hasn’t filled yet b/c we are in March (due April 30th), so she gets the option to file either for April 30th, 2020 OR the later of 6 months – in this case could file by the end of August (technically September 6th, 2020)
2020 – later of regular deadline or 6 months after death. – in this case the later is the regular deadline, so April 30th, 2021
500
Anna is self employed and contributes $5,796 to CPP. Explain the tax treatment for the CPP amounts
Tax credit of $2,732 x 15%
3c deduction of $3,064
500
What is the childcare deduction available for a single parent of a 5 year old child? The parent is earning $100,000 a year and spent $9,000 total on childcare during the year
Lesser of:
1) $9,000
2) 1 x $8,000= $8,000
3) 2/3 xx $100K = 66,666
500
Who is this famous cricket player?
Virat Kohli
500
John is a commission sales person and has a home office. Jane is the VP of Marketing for a local food chain and is required to have an office at home. What home office expenses are deductible for each?
John: regular office expenses plus home office costs such as R&M, property tax and home insurance, prorated to the size of the office to the overall size of the house.
Jane: regular office expenses plus R&M costs prorated to the size of the office to the overall size of the house.