George Brown College Canada - ACCT 2028 Practice Mid-Term v1 1)Children of members of the Canadian armed forces are considered to be Canadian residents, without regard to where they actually live

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George Brown College Canada - ACCT 2028

Practice Mid-Term v1

1)Children of members of the Canadian armed forces are considered to be Canadian residents, without regard to where they actually live.

 

1. 1. True
   2. False

 

2. Which of the following is NOT a factor in determining whether an individual has ceased to be a Canadian resident?

1. The individual's spouse and dependent children have left Canada.
2. The individual is no longer physically present in Canada.
3. The individual has become a resident of another country.
4. The individual has given up his Canadian citizenship in order to become a citizen of

another country.

 

 

3. The goods and services tax is assessed at a single rate, applied to certain specified goods and services. Despite the use of a single rate, this tax is criticized for being a regressive tax. What is a regressive tax? Explain how a tax that is assessed at a single rate can be considered regressive. (2 marks)

 

 

 

4. With respect to Canadian income taxes on non-residents, which of the following statements

is NOT correct?

• Non-residents must pay Canadian income taxes on employment income earned in

Canada.

• Non-residents must pay Canadian income taxes on capital gains arising on dispositions

of any Canadian property.

• Non-residents must pay Canadian income taxes on business income earned in

Canada.

• Non-residents must pay Canadian income taxes on gains resulting from the sale of

Canadian real property.

 

5. For each of the following persons, indicate how they would be taxed in Canada for the year

ending December 31, 2019. Your answer should explain whether the person is a Canadian

resident, what parts of their income would be subject to Canadian taxation, and the basis for

your conclusions (6 marks).

Case 1

In 2019, Mark’s Canadian employer asked him to spend two years working in their Delhi

office. His employment contract requires him to return to Canada in 2020. Mark severs all of

his residential ties with Canada and moves to Delhi in November, 2018. He is not present in

Canada during any part of 2019.

           

 

 

 

Case 2

Maxine is married to a member of the Canadian armed forces who is serving in Latvia. She is a

citizen of Latvia and has never visited Canada. During 2019, because her husband is a

member of the Canadian armed forces, she is not subject to taxation in Latvia.

 

 

Case 3

Susan is a U.S. citizen who lives in Detroit, Michigan. During 2019 she is employed 5 days per

week in Windsor, Ontario. Her 2019 salary is $65,000. In addition, she has $2,000 (Canadian)

of interest on a savings account with a Detroit bank.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6. The following four Cases make different assumptions with respect to the amounts of income and deductions of Ms. Susan Reed for the current year:

Required For each Case, calculate Ms. Reed’s Net Income For Tax Purposes (Division B income). Indicate the amount and type of any loss carry overs that would be available at the end of the current year, or state that no carry overs are available (8 marks).

 

 

 

 

 

7. Under what circumstances must an individual file an income tax return? If an individual is required to file an income tax return, by what date must it be filed? (2 marks)

 

 

 

 

 

8. Jane Dallas filed her 2018 tax return on the April 30, 2019 due date. She received her Notice of Assessment on July 15, 2019. The Notice did not indicate any problems with her return. On January 13, 2020, she receives a Notice of Reassessment, indicating that deductions of $15,000 were being disallowed and that she owed an additional $5,900 in taxes. The reassessment was dated January 10, 2020. Jane does not agree with the reassessment and has asked your advice on how to deal with the situation. Outline the procedures that can be taken by Jane to appeal this assessment.(4 marks)

 

 

 

9. With respect to the filing of an individual income tax return, which of the following statements

is NOT correct?

1. 1. An individual is required to file an income tax return if their only source of income is

business income, even if no tax is payable.

1. 2. An individual is required to file a tax return if he has an outstanding balance under the home buyers plan.
   3. If an individual has disposed of a capital property during the year, they are required to file an income tax return, even if no tax is payable.
   4. An individual is required to file an income tax return if they owe taxes for the year

 

 

 

 

 

10. Martin Houde is retired and recently divorced. He filed his 2019 tax return on February 3, 2020. He received a portion of the tax refund claimed and a notice of assessment, dated May 12, 2020, which set out the difference between the amount claimed and the amount of the refund. As Martin disagrees with the notice of assessment, he wishes to file a notice of objection. By which of the following dates must he file his notice of objection?
    1. February 3, 2021.
    2. May 12, 2021.
    3. April 30, 2021.
    4. August 10, 2020.
    5. June 15, 2021.

 

11. One of the advantages of being classified as a self-employed contractor is that you have a larger range of available tax deductions.
    1. True
    2. False

 

12. If an individual has to purchase his own tools, it is an indication that he is an employee, rather than an independent contractor.
    1. True          
    2. False

 

13. During the current year, Gerri’s employer provides him with a $200 non-cash wedding gift and a $700 non-cash gift as an award for 10 years of service. There will be no inclusion in Gerri’s income for the gifts.
    1. True
    2. False

 

14. The standby charge on an automobile owned by the employer and provided to an employee will always be equal to 2 percent of the cost of the car for each month of availability.
    1. True
    2. False  
15. To be considered reasonable, an allowance paid to an employee for using his automobile in employment related activities must be based on kilometers of use.
    1. True
    2. False

 

16. When an employer requires an employee to move to a new location, he can reimburse the employee for any housing loss that arises on the sale of his home in the old location, without creating a taxable benefit.
    1. True
    2. False 

 

17. Which of the following would not be an advantage of being employed as opposed to being an independent contractor?
    1. The ability to receive more fringe benefits.
    2. The ability to make lower CPP payments.
    3. The ability to pay income tax in quarterly instalments.
    4. Greater job security.

 

18. Which of the following items would be considered a taxable benefit to an employee?
    1. Discounts on merchandise sold by the employer.
    2. A $450 gift certificate that can be used at a local clothing store.
    3. Premiums on private health insurance plans.
    4. The cost of counseling services related to mental health.

 

 

 

 

 

 

19. During 2019,Ms. Green’s employer provides her with an automobile for 11 months of the year. It cost $58,760, including applicable HST. She drives it a total of 62,000 kilometers. Of the total kilometers driven, 16,000 relate to personal use of the automobile. The employer pays all maintenance costs which total $9,200 for the year. What is the minimum taxable benefit for the use of the automobile that will be assessed to Ms. Green for 2019?
    1. $17,407
    2. $16,920
    3. $15,760
    4. $16,785

 

 

20. Which of the following allowances would have to be included in an employee’s Net Income For Tax Purposes?
    1. An allowance of $70 per day for food while traveling on the employer’s behalf.
    2. An allowance of $200 per day for lodging while traveling on the employer’s behalf.
    3. An allowance of $600 per month to compensate the employee for using his personal automobile for employment related activities.
    4. allowance of $0.40 per kilometer to compensate an employee for using his

personal automobile for employment related activities

 

 

 

21. On April 1, 2019, Virgil van Delden receives a $100,000 loan from his employer for investment purposes. The loan requires that interest be paid at a rate of 1 percent. Assume that prescribed rates applicable to the last three quarters of 2019 are as follows:

2nd Quarter 4%

3rd Quarter 3%

4th Quarter 2%

What is the amount of the taxable benefit that will be assessed to Mr. van Delden as a result of having this loan?

1. 1. $1,250
   2. $1,500
   3. $2,250
   4. $3,000

 

 

 

 

 

22. Lily Zhao is a commission salesperson who is required to have an office in her personal residence. Which of the following home office related costs cannot be included in the amount that she deducts for this office?
    1. Interest on the mortgage.
    2. Maintenance costs.
    3. Property taxes.
    4. Fire insurance.

 

 

 

23. Amir Patel is a commission salesperson with a base salary of $96,000. During 2019, he earns commissions of $16,000, with $7,000 of this not being paid until January, 2020. During 2019, he incurs the following expenses:

• Meals and Entertainment With Clients $23,000
• Hotel And Airline Tickets $12,000

What is the amount of Amir’s maximum deduction for these costs in determining his 2019 employment income?

1. 1. $35,000
   2. $23,000
   3. $16,000
   4. $12,000
   5. $9,000

 

 

 

 

24. Ms. Marsh has been employed by the Ace Distributing Company for the past three years. During 2019, the following amounts were credited to Ms. Marsh’s payroll account:

• Salary of $40,500 as per her employment contract.
• Reimbursement of employment related travel costs as per invoices supplied by Ms. Marsh totalling $4,250.
• Reimbursement of $1,100 in tuition fees for a work related course.
• A $1,560 dividend on Ace Distributing Company shares acquired through the employee purchase program.
• Fees of $1,200 for serving as the employee’s representative on the Company’s board of directors.

From the preceding credits to Ms. Marsh’s payroll account, the following amounts were withheld by the Company:

• Income taxes $6,423
• Premiums on group medical insurance 342
• Contributions to registered pension plan 1,400

With respect to the registered pension plan, the Company also made a $1,400 contribution on behalf of Ms. Marsh. In addition to the preceding, Ms. Marsh made the following payments during the year:

• Dental expenses $1,250
• Charitable donations 275
• Costs of moving to a larger apartment 2,800
• Tuition fees for work related course (reimbursed) 1,100
• Life insurance premiums 850
• Cost of travel to and from place of employment 620
• Cost of employment related travel (reimbursed) 4,250

The dental expenses were not covered by her medical insurance.

Required: Calculate Ms. Marsh’s net employment income for the 2019 taxation year. Provide reasons for omitting items that you have not included in your calculations. Ignore all GST implications (20 marks).

 

 

 

 

25. Provide the information required by the following Exercises.
    1. During 2019, Mr. Shaun Badry is provided with an automobile that is leased by his employer. The monthly payment on this lease is $565, including $65 of HST. During 2019, he drives the car a total of 35,000 kilometers, of which 27,500 are employment related. The car is used by Mr. Badry for a total of 265 days during 2019. When the car is not being used by Mr. Badry, it must be returned to the employer's premises. Calculate Mr. Badry’s minimum taxable benefit for the use of the automobile. (8 marks)

 

 

 

 

 

 

 

 

1. 2. Mr. Alonso Sotomeyer is required by his employer to use his own automobile in the course of his employment. His total automobile costs for the year, including lease costs, are $11,460. To compensate him, his employer pays an annual allowance of $12,000. During 2019, he drove his automobile a total of 48,260 kilometers, of which 19,960 were employment related. What amounts will Mr. Sotomeyer include and deduct from his 2019 employment income related to the use of his automobile (7 marks)

 

 

1. 3. Ms. Cheryl Fernandes is a member of a group disability plan sponsored by her employer. The plan provides periodic benefits that compensate for lost employment income. The cost of the plan is shared with her employer. Her share of the cost was $460 in 2018, and $500 in 2019. During 2019, Ms. Fernandes was hospitalized for a period of 2 weeks, resulting in her receiving $7,400 in benefits under the plan. What amount, if any, will Ms. Fernandes include in her 2019 employment income for the disability benefits? (7 marks)

 

 

 

 

26. Which of the following tax credits is refundable to the taxpayer?
    1. Canada Employment Amount.
    2. Donations and Gifts
    3. Amount for an Eligible Dependent.
    4. Home Buyers Amount
    5. None of the above

 

27. Which of the following items is NOT a deduction in the determination of Taxable Income?
    1. Lifetime capital gains deduction.
    2. Non Capital Loss carry overs from a previous taxation year
    3. Eligible medical expenses.
    4. Net Capital Loss carry overs from a previous taxation year

 

28. Which of the following statements is NOT correct with respect to an individual who qualifies for the eligible dependant tax credit? The individual must be:
    1. related by blood, marriage, adoption, or common-law relationship.
    2. under 18 at some time during the year.
    3. residing in Canada unless they are a child of the taxpayer.
    4. living with the taxpayer in a self-contained domestic establishment

 

29. Mr. Kevin Bhomic has a spouse and a 19 year old dependent son. Mr. Bhomic’s 2019 Net Income For Tax Purposes is $117,000. For 2019, Mr. Bhomic’s spouse has no income and his son has Net Income For Tax Purposes of $7,200. During 2019, Mr. Bhomic and his spouse have medical expenses of $2,842. His son has medical expenses of $8,200 which Mr. Bhomic paid. Determine Mr. Bhomic’s medical expenses credit for 2019 (15 marks)

 

 

 

30. Alexandra Borat is 42 years old and divorced from her husband. Her Net Income For Tax Purposes for 2019 is $84,000. She has retained the family home and both of the children of the marriage live with her. Her son is 23 years old and suffers from mental impairment. He does not qualify for the disability tax credit. Her daughter is 14 years old and in good health. Her son has no income during the year, while her daughter has Net Income For Tax Purposes of $4,300. Determine Ms. Borat’s maximum federal tax credits for 2019. (15 marks)

 

 

 

 

31. Kumar Singh has 2019 Net Income For Tax Purposes of $92,000. After receiving a large inheritance from his uncle’s estate, he donates $110,000 to the Canadian Kidney Foundation. He chooses to claim $23,000 of his donation in 2019. In 2020, his income remains at $92,000 and he makes no further donations. Determine Mr. Singh’s charitable donations tax credit for 2019, as well as the base for the maximum allowable charitable donations tax credit for 2019 and 2020. Until what year can he claim any unused portions of his 2019 donation?.