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Chapter: 4 -Problem: 4 >> An individual begins employment on December 16, 2022. Their employer pays salaries monthly on the 15th day of each month. The individual receives their first salary payment of $3,000 on January 15, 2023. How much, if any, of the $3,000 is taxable in 2022? How much in 2023? Explain.
Answer Preview: The taxation year of an individual is the calendar year endin…

, Chapter: 22 -Problem: 4 >> What is a small supplier and what are the implications of losing small supplier status?
Answer Preview: A small supplier is a person who provides taxable supplies (i…

, Chapter: 5 -Problem: 3 >> Bass Ltd., a Canadian-controlled private corporation, sold two parcels of land during its 2022 taxation year. Details of each transaction are as follows:1. Bass sold a one-hectare site in Ottawa for $200,000. They received the full price in cash. They had purchased the land five years before for $160,000. Bass had intended to construct a warehouse on the land for the purpose of storing inventory f
Answer Preview: a. The sale of the Ottawa land is considered a capital gain because it was purchased with the intent…

, Chapter: 9 -Problem: 10 >> Brody Gill has a lawn care business, which he incorporated in 2022. On incorporation, Brody and a trust for his 15-year-old son each subscribed for one common share at $100 per share. Brody paid the $200 for both the shares. The corporation will pay dividends annually to Brody and the trust, which will distribute the dividend to the son. Describe the tax treatment of the dividend income received b
Answer Preview: In this case, a child under age 18 is receiving divide…

, Chapter: 3 -Problem: 11 >> A taxpayer’s tax liability was $1,200 for 2020 and $12,000 for 2021, and is expected to be $36,000 for 2022. Is the taxpayer required to make tax instalments for 2022? If so, What are the amounts and the due dates for the instalments?
Answer Preview: Yes, the taxpayer is required to make tax installments for 2022 as their tax liability for 2021 exce…

, Chapter: 3 -Problem: 7 >> What is the filing due date for each of the following income tax returns for the 2022 taxation year? (a) A corporation for its year ending November 30.(b) An individual who carried on a business in the year.(c) A single individual living alone who did not carry on a business.(d) An individual who died on February 21, 2023.
Answer Preview: The filing due dates are as follows: a. May 31, 2023(six months after the year-end of th…

, Chapter: 3 -Problem: 2 >> Mateo Lopez is not a resident of Canada. For the current year, Mateo has worldwide income of $120,000, including $15,000 of employment income earned in Canada and $2,000 of interest received from Canadian banks. The remainder of his income is from sources outside of Canada. What amount of income must be reported on Mateo’s Canadian personal income tax return for the current year?
Answer Preview: A non-resident must report three sources of income on a Canadian t…

, Chapter: 4 -Problem: 1 >> Darius Watkins is a Chartered Professional Accountant. He has carried on a professional business as a tax consultant for 12 years. By the end of 2021, the practice had grown very large. Darius was overworked and under pressure to hire additional staff or take on a partner. He was interested in education and several years earlier had contracted with a publisher to write a book on taxation for unive
Answer Preview: Based on the information provided, Darius can be considered as self-employed in 2022. Reasons to sup…

, Chapter: 10 -Problem: 13 >> Elle Klein received old-age security (OAS) payments during 2022 totalling $8,000. Her net income for the year is $85,000. No amount was withheld from the OAS payments as her income was lower in previous years. Determine Elle’s OAS recovery tax (Part I.2 tax) for 2022.
Answer Preview: Pensioners with net income above $81,761(2022) must repay part, or all, of the OAS pension. The re…

, Chapter: 1 -Problem: 4 >> What is an “after-tax” approach to decision making?
Answer Preview: All cash flow decisions, whether related to revenues, expenses, asset acquisiti…

, Chapter: 4 -Problem: 11 >> Yuen Li was terminated from his employment with Exit Ltd. in July 2022. In November, he began work as a commission salesperson for Kolex Ltd., a Canadian public corporation. Yuen has asked you to help him prepare his 2022 tax return. Information regarding his employment for 2022 is outlined below:1. Yuen’s employment with Exit was terminated on July 31. His salary to that date was $62,000. Besides
Answer Preview: Yuen's employment income for tax purposes for 2022 can be calculated as follows: Salary from Exit L…

, Chapter: 8 -Problem: 14 >> On October 24, 2022, Anika Agarwal moved to a rural area in India from Ottawa, Ontario. She became a non-resident of Canada for tax purposes on that date. At the time of the move, she owned the following assets:(a) Which of the assets are deemed disposed at market value on emigrating from Canada? (b) Are there elections available to minimize the tax burden on emigrating? (c) How would your answer
Answer Preview: (a) When Anika becomes a non-resident of Canada, she is deemed to have disposed of certain assets at …

, Chapter: 4 -Problem: 3 >> Jennifer Garcia’s employer provides her with the following gifts and awards in 2022: Briefly describe the tax consequences to Jennifer from the above gifts and awards. Transcribed Image Text: Golf shirt with the employer logo (cost amount) Birthday gift (monetary restaurant gift certificate) Reward
Answer Preview: The tax consequences to Jennifer from the above gifts and awards depend on whether they are consider…

, Chapter: 6 -Problem: 9 >> Takeover Corp. purchased another business in 2020. The purchase price included $100,000 for goodwill. In 2022, the acquired business was sold. The sale price included $140,000 for the goodwill. Calculate the amount to be included in Takeover Corp.’s business income in 2022. Assume the Class 14.1 balance at the beginning of 2020 is $0.
Answer Preview: In Canada, the tax treatment of goodwill depends on whether it is considered eligible or ineligible for the purposes of the capital cost allowance (CC…

, Chapter: 10 -Problem: 15 >> George King’s date of death is October 24, 2022. In his final tax return for 2022, taxable capital gains of $200,000 on his stock portfolio were reported. In 2023, the value of his stock portfolio declined severely. The portfolio was sold in late 2023 by the estate executor, creating a large capital loss. As well in 2023, a large donation was made to the local hospital in accordance with George’s
Answer Preview: The capital loss is reported on the T3 Trust Income Tax and Information Return for the Estate of Geo…

, Chapter: 10 -Problem: 3 >> At the end of 2021, Ryan Ali had a balance in his cumulative net investment loss (CNIL) account of $14,500. In 2022, Ryan earned net rental income of $5,000 and received eligible dividends from Canadian corporations of $1,000. He incurred interest expense of $3,000 relating to his stock portfolio. Determine Ryan’s CNIL balance at the end of 2022.
Answer Preview: Ryan's CNIL balance at the end …

, Chapter: 3 -Problem: 12 >> The date issued on the Notice of Reassessment for a taxpayer’s 2017 tax return was July 10, 2022. The date issued on the original Notice of Assessment for the taxpayer’s 2017 tax return was June 20, 2018. (a) Does CRA have the right to reassess the 2017 tax return on July 10, 2022? (b) If the taxpayer wishes to dispute the reassessment, by what date must the Notice of Objection be filed?
Answer Preview: a. Individuals, trusts, and CCPCs can be reassessed within three years of the date the original asse…

, Chapter: 6 -Problem: 10 >> Steve Bishop purchased a computer for $2,000 last year for his personal use. In February of the current year, Steve started a home-security business and began to use the computer exclusively for business purposes. He purchased an iPad for his personal use. Explain the tax implications for the current year, 2022.
Answer Preview: ANSWER The tax implications for Steve Bishop for the current year, 2022, will depend on the extent o…

, Chapter: 13 -Problem: 7 >> Pembroke Realtors Ltd. is a closely held Canadian-controlled private corporation. At the end of 2022, during which it earned an unusually high profit, the corporation paid additional salaries of $200,000 to its officers who are also the shareholders. The salaries were paid in proportion to each shareholder’s holdings in the corporation. After reviewing the transaction, the CRA proposes to disallow
Answer Preview: 1. CRA may justify their proposal to deny the deduction of a portion of the salaries ($60,000) award…

, Chapter: 8 -Problem: 3 >> In 2019, Ross Delacruz loaned $10,000 to a small business corporation. The loan bears interest at 6% per annum and is due on demand. Ross did not receive his interest in 2021 although he reported it on his 2021 tax return. By December 31, 2022, it was established that the loan was bad and that Ross would not be receiving the $10,000 principal or the interest for 2021 or 2022. Determine the 2022 ta
Answer Preview: The interest income included in Rosss 2021 income has become a bad debt i…

, Chapter: 13 -Problem: 6 >> Quality Quo is a Canadian-controlled private corporation carrying on business in Canada. For its year ended December 31, 2022, Quality Quo earned income from the following sources: • Active business income • Gain on sale of asset used in the active business • Dividends from taxable Canadian corporations.Quality Quo is associated with one corporation, Pear Inc. Pear Inc. was allocated a business li
Answer Preview: 1. Active Business Income: Active business income is income earned by a corporation from carrying on an active business. This income is subject to fed…

, Chapter: 5 -Problem: 5 >> The controller of Mead Pipes Ltd. is preparing the corporation’s 2022 tax return but is uncertain about the tax treatment of the following eight expense items:  Required: Determine the amount by which the preceding items will reduce the net income for tax purposes of Mead Pipes Ltd. for 2022. When an item has been totally excluded from your calculation, provide a brief reason why. 
Answer Preview: The items will reduce net income for tax purposes by: The following items were excluded: Property ta…

, Chapter: 6 -Problem: 5 >> On May 1, 2022, Kayla Tsuji purchased a Frosty Frozen Foods franchise and began carrying on business immediately as a sole proprietor. She paid $60,000 for the franchise. The franchise agreement has a 10-year term. The frozen foods business was so successful that Kayla quickly needed more space. On November 1, 2022, Kayla purchased a small building for $200,000 (land $100,000 + building $100,000)
Answer Preview: To calculate the maximum CCA deduction for Kayla's Frosty Frozen Foods franchise and building for 20…

, Chapter: 9 -Problem: 5 >> The following information relates to Perry Somer’s financial affairs in 2022:1. Perry is employed as a salesperson and is remunerated by commissions. He must pay all of his own expenses. During the year, he earned commissions of $58,000. His expenses were as follows: The personal-use portion of his automobile expense is 20%. The UCC of his automobile at the end of the previous year was $5,000. 2.
Answer Preview: ANSWER (a) Calculation of Perrys 2022 net income in accordance with the aggregating formula for determining net income for tax purposes: Commissions e…

, Chapter: 3 -Problem: 15 >> Jane Quinn owned an apple orchard for 20 years. During that time, she had cultivated a unique brand of apple that was popular with health food fans. Toward the end of the 2022 growing season, Jane became seriously ill and put the orchard up for sale. Jane’s neighbour agreed to purchase the entire orchard for $250,000. It upset Jane to have to sell at that time of year because the year’s crop was o
Answer Preview: The types of property that might have been included in the total purchase price of $250,000 for the …

, Chapter: 12 -Problem: 6 >> What is a buy-back of corporate shares?
Answer Preview: A buyback of corporate shares means that a shareholder sells previously issued shares back to th…

, Chapter: 10 -Problem: 14 >> In 2022, Jon Patel, who is single, earned rental income of $30,000, capital gains of $100,000, and Canadian non-eligible dividends of $20,000. He is exempt from CPP and EI. In addition, Jon is a limited partner in a Canadian limited partnership from which he was allocated a business loss of $34,000. Does Jon have to pay federal alternative minimum tax (AMT) in 2022 and, if so, how much? Also, brie
Answer Preview: The alternative minimum tax (AMT) rules are designed to impose a minimum level of tax on individual…

, Chapter: 21 -Problem: 2 >> If a corporation is subject to a 27% tax rate, why may it be advantageous for it to issue debt as opposed to preferred shares?
Answer Preview: Debt financing is serviced by the payment of interest thatis fully deductible from corporate income …

, Chapter: 13 -Problem: 5 >> On March 1, 2022, Martin Torres received an interest-free loan from his employer, X Ltd., a private corporation, owned by his spouse. Martin used the loan to purchase the condominium in which he lives. A loan agreement was signed by Martin agreeing to repay the loan in full after three years. Such a loan is not available to other employees. X Ltd. has a June 30 year-end. Determine the tax implicat
Answer Preview: Since a similar loan is not available to other employees, Martin is consi…

, Chapter: 4 -Problem: 9 >> Richard Ahmed earns a salary of $70,000 in 2022 as an employee of B Ltd. He pays the following expenses to earn his income: (a) Determine the maximum deduction for employment expenses that Richard is entitled to claim in computing his income for 2022. (b) How would your answer to (a) change, if at all, if Richard was a salesperson and received commission income of $6,000 in addition to his salary,
Answer Preview: There is only one provision of the Act that permits an employee to deduct advertising and promotion …

, Chapter: 4 -Problem: 2 >> Mike Bernard’s employer has a generous benefit program. During 2022, his employer provides him with the following benefits: • A contribution to the company RPP of $6,000 • Group term life insurance coverage of $100,000; the premium for the coverage is $400• Group sickness or accident insurance coverage; the premium paid is $550 • A private health services plan that provides Mike with dental, visio
Answer Preview: Mike must include $2,100 in his income for tax purposes. The fo…

, Chapter: 13 -Problem: 6 >> Hallie Wolf owns 2% of the shares of Y Ltd. She is also employed by Y in a middle management position. On August 1, 2022, Hallie received a loan from Y that she used to repay personal debts. Hallie signed a loan agreement, agreeing to pay interest on the loan at the bank prime rate in effect on August 1, 2022, and to repay the loan over three years by monthly payroll deductions. Similar loans have
Answer Preview: Since Hallie is a shareholder of Y Ltd., the shareholder loan rules m…

, Chapter: 8 -Problem: 1 >> Colin Fitzgerald sold capital property in 2022 for $600,000 and incurred $24,000 in selling costs. The property had an adjusted cost base of $176,000. Colin received $150,000 at the time of the sale and a note for the balance. The note is to be repaid over nine years in equal instalments of $50,000, commencing in 2023. Determine the minimum taxable capital gain to be reported by Colin in 2022, 202
Answer Preview: The minimum taxable capital gain to be reported is $50,000 in 2022, $30,0…

, Chapter: 10 -Problem: 3 >> In 2022, William Barker, who is single, earned the following income and incurred the following losses: employment income – $16,000; business loss – $4,000; taxable capital gains – $7,000; property income (interest) – $18,000; allowable capital loss from the sale of shares of public corporations – $9,000; allowable capital loss from the sale of shares of a Canadian controlled private corporation th
Answer Preview: First, let's calculate William's total income for 2022: Employment income: $16,000 Taxable capital g…

, Chapter: 22 -Problem: 11 >> Linda Hernandez filed her GST return for the January 1–December 31, 2021 period, claiming a refund of $1,000 since her ITCs exceeded the GST collected. She was selected for a pre-assessment review by the CRA and was asked to submit documentation to support her refund. The CRA assessed the return, adjusting the refund of $1,000 to a balance owing of $200. The assessment was issued on July 15, 2022.
Answer Preview: Linda can dispute her GST assessment by filing a notice of objection. The objection must outline the …

, Chapter: 22 -Problem: 1 >> Duncan Bostock is a sole proprietor in his first year of operations. The following table summarizes his taxable supplies for the current year: (a) When is Duncan required to register for GST/HST? (b) How would your answer change if Duncan had an additional $20,000 of taxable supplies on June 30? Transcribed Image Text:
Answer Preview: a: Duncan will lose small supplier status and be required to register for GST/HST when he exceeds $3…

, Chapter: 15 -Problem: 3 >> A Ltd. and B Ltd. are partners in the Triple M partnership. A Ltd. and B Ltd. share equally in the income or loss of the partnership annually. The partnership earns business income of $100,000 and $300,000, respectively, for its years ended June 30, 2022, and June 30, 2023. Income from the Triple M partnership is A Ltd.’s only source of income for its year ended December 31, 2022. In 2021, A Ltd.
Answer Preview: For its year ended December 31, 2022, A Ltd. must include $55,205 of business income ca…

, Chapter: 4 -Problem: 10 >> Julie Sami is required to use her own automobile and pay for all her travelling expenses in carrying out her duties of employment. She purchased a new car on January 2, 2022, for $45,000 (plus HST @ 13%) and incurred the following expenses during the year: Julie drove her car 20,000 km in 2022, of which 8,000 km were for carrying out her duties of employment. Calculate the maximum tax deduction av
Answer Preview: The maximum tax deduction available to Julie for her car is $10,392, c…

, Chapter: 3 -Problem: 2 >> Samuel Tamm is the sole shareholder of MET, a Canadian-controlled private corporation carrying on an active business, with a December 31 fiscal year-end. Samuel met with you on January 6, 2023, about a number of issues. On August 1, 2022, Samuel received a demand to file a tax return for the 2020 taxation year. Samuel did not file a tax return for 2020 because salary from MET was his only income f
Answer Preview: MEMORANDUM To: Samuel Tamm From: [Your Name] Date: [Date] Subject: Tax Issues I am writing in response to the issues that you raised during our meetin…

, Chapter: 10 -Problem: 2 >> Kendra Thompson disposed of shares of A Ltd.—a qualified small business corporation (QSBC)—in 2022, realizing a taxable capital gain of $350,000. She has net capital losses from last year of $10,000, which she wants to claim in the current year. Her cumulative net investment loss (CNIL) account at the end of the year is $3,000. Kendra claimed an allowable business investment loss (ABIL) of $12,000
Answer Preview: The capital gains deduction claimable by Kendra in 2022 is $325,000 being the least of …

, Chapter: 10 -Problem: 8 >> Brent Wells is single and lives alone. During 2022 he earned employment income of $140,000. His employer withheld EI ($953) and CPP ($3,500) contributions of $4,453 (including CPP enhanced contributions of $461) and income tax. He has a portfolio of investments that generated eligible dividends from Canadian corporations of $10,000. He donated public company shares worth $1,000 to the Canadian Can
Answer Preview: Gains on donations to charities of publicly listed …

, Chapter: 6 -Problem: 8 >> Noluck Enterprises Inc. has a December 31 year-end. On March 20, 2022, the company’s warehouse was destroyed by fire. The original cost of the warehouse was $120,000. At the time of the fire, the warehouse was valued at $300,000 and was insured. Class 1 had a UCC balance of $95,000 at December 31, 2021. Noluck was forced to lease a warehouse until a new one could be acquired. On November 30, 2024,
Answer Preview: Class 1: When the disposition is involuntary and recapture occurs, the taxpayer is permitted to defe…

, Chapter: 13 -Problem: 17 >> In addition to its active business income of $300,000, P Ltd, a CCPC, received dividends of $30,000 from a public corporation and had a taxable capital gain of $90,000 on the sale of passive investments in 2021. A net capital loss carry-over from a previous year of $20,000 was deducted in arriving at the corporation’s taxable income. Management anticipates that in 2022, P Ltd will earn active busi
Answer Preview: Because P Ltd. has excess income from passive investments in 2021, the 2022busines…

, Chapter: 10 -Problem: 6 >> Angelina Tobin has employment income of $130,000 for 2022. She is single and lives alone. Angelina’s employer withheld EI and CPP contributions of $4,453 (includes CPP enhanced contributions of $461) and income tax. Determine Angelina’s federal tax payable for 2022 under each of the following assumptions: (a) She has net income and taxable income of $130,000.(b) She has net income and taxable inco
Answer Preview: Angelinas federal tax payable for 2022 under each of three income alternatives is as follows: Basic …

, Chapter: 14 -Problem: 11 >> What is a holding corporation?
Answer Preview: A holding corporation is a corporation, owned by an individual o…

, Chapter: 4 -Problem: 12 >> Malia Garcia is a professional engineer. In 2022, she sold her consulting business in Hamilton, Ontario, and moved to Vancouver, British Columbia, where she was employed by an equipment-manufacturing business. The following financial information is provided for 2022: 1. Malia began her employment on February 1, and during the year received a salary of $90,000, from which the employer deducted inco
Answer Preview: (a) Malia's employment income for tax purposes for 2022 can be calculated as follows: Salary: $90,0…

, Chapter: 4 -Problem: 1 >> Carole Patel receives a salary of $60,000 during the current year. In addition, she earns commission income of $25,000, of which she receives $15,000 in the current year. She receives the remaining $10,000 in the first quarter of the following year. Determine Carol’s employment income for the current year, 2022.
Answer Preview: Carole's employment income for the current year, 2022…

, Chapter: 13 -Problem: 1 >> John Basler is employed in the transportation industry and earns a substantial salary. He also owns 100% of the shares of Truck Ltd. The corporation is a 20% partner in a small trucking business. In 2021, the partnership earned a net profit of $80,000.John intends to do some consulting work starting in 2022 while continuing in his present employment. A small trucking company has requested that he
Answer Preview: 1. If John earns the consulting income as a proprietor, the income will be taxed at his personal tax rate of 45%. Over the two year period relating to the consulting contract his after-tax profits ava…

, Chapter: 6 -Problem: 1 >> In the current year, Eddie Enterprises Ltd., a public corporation, purchased new office equipment costing $40,000. The vendor gave Eddie Enterprises $3,500 for the old office equipment, which was purchased three years ago for $6,000. At the beginning of the current year, the Class 8 UCC balance was $10,000.Calculate the maximum CCA deduction for Class 8 for the current year, 2022.
Answer Preview: Class 8 UCC balance, beginning of year …

, Chapter: 3 -Problem: 13 >> A Canadian-controlled private corporation filed its tax return for its year ended December 31, 2021 on June 30, 2022. The Notice of Assessment was received August 31, 2022. The date issued on the Notice of Assessment was August 28, 2022. (a) Assuming there were no misrepresentations and that a waiver was not filed, how long does CRA have to issue a reassessment for 2021? (b) If the corporation wis
Answer Preview: a. The CRA has until August 28, 2025, being three years from the date issu…

, Chapter: 9 -Problem: 13 >> Irene Salomon died in 2022. At the time of her death, she owned the following assets:• Antique furniture: fair market value (FMV) – $30,000; cost – $10,000 • Rental property—land: FMV – $100,000; cost – $60,000; building: FMV – $60,000; cost – $50,000; UCC – $45,000 • RRSP: FMV – $80,000 • TFSA: FMV – $50,000In her will, Irene directed her executors to transfer the antique furniture to her spouse
Answer Preview: All capital property, including depreciable property, owned by Irene is deemed to have been sold at …

, Chapter: 9 -Problem: 1 >> Harvey Case man died on July 15, 2022. At the time of his death, he owned the following assets:Over the years, Harvey had claimed capital cost allowance on the building. Its undepreciated capital cost is $28,000. In his last will and testament, Harvey directed his executors to transfer the rental property to his two children and the piano to his spouse. Required:(a) Determine to what extent, if an
Answer Preview: a. Property left to children : Capital property left to children is deemed to be disposed at fair ma…

, Chapter: 3 -Problem: 8 >> For each of the following individuals, determine when their income tax return for 2022 is due and when any balance of tax owing is due. (a) Bob Wu is single. He has two sources of income: employment income and interest income. (b) Maria Rodriguez is a self-employed lawyer. Her law practice has a December 31 yearend. (c) Ron Smith’s only source of income is employment income. Ron’s spouse is Maria.
Answer Preview: a. Bobs tax return is due April 30, 2023[ITA 150(1)(d)(i)]. The balance of tax owing, if any, is due …

, Chapter: 14 -Problem: 6 >> Holding Ltd., a Canadian-controlled private corporation, acquired 100% of the shares of Operating Ltd. on incorporation in 2022 for $100,000. The shares of Operating Ltd. have appreciated in value since then. A large part of the share appreciation is attributed to land Operating Ltd. owns which has doubled in value. The post-1971 retained earnings of Operating Ltd. are currently $500,000 (safe inc
Answer Preview: The anticipated sale will result in a tax-free dividend of $100,000 and a capital gain of $800,000. …

, Chapter: 6 -Problem: 6 >> Harley Krane purchased a side-by-side duplex in 2020 for $120,000 (land $20,000, building $100,000). The units were designed and previously used for residential use but Harley used them for his business. Both units were used to conduct his law practice; one unit housed a small group of paralegals in his employ, who processed most of the real estate transactions for his clients.In 2022, Harley stop
Answer Preview: The two units of the duplex are included together in Class 1 for capital cost allowance purposes. Th…

, Chapter: 22 -Problem: 5 >> Lisa Beil began carrying on her business in a GST province on July 1, 2020 and has a calendar fiscal year end. Lisa registered for annual GST filing on May 1, 2021. Today is April 30, 2022, and Lisa just realized she was required to charge GST as of February 1, 2021 since her taxable supplies exceeded $30,000 under the cumulative sales test during December 2020. Lisa billed customers $15,000 exclu
Answer Preview: Since Lisa was required to collect GST as of February 1, 2021, she will need to include 5% of $15,00…

, Chapter: 16 -Problem: 2 >> A new business venture requires $600,000 of equity capital from passive investors in addition to the $400,000 of capital that is being provided by the initiator of the project. The $600,000 will be raised by selling 30 units for $20,000 each. The 30 unit holders will participate in 60% of the venture’s profits. It is anticipated that business operations will begin on October 1, 2022. The entity wi
Answer Preview: Based on the information provided, a limited partnership may be more suitable for the initiator to r…

, Chapter: 4 -Problem: 4 >> On September 1 of the current year, Teresa Chang will have worked for A Ltd. for three years and will be entitled to a company car as of that date. A Ltd will have to pay $48,000, including tax, to purchase the car that Teresa wants. If the car is leased, the monthly lease cost will be $950, including tax. In either case, A Ltd. will pay all of the operating costs for the car, which are expected t
Answer Preview: (a) (i) If A Ltd. purchases the car, the standby charge and operating cost benefit will be included in Teresa's employment income. The standby charge …

, Chapter: 9 -Problem: 1 >> Fred Dunn contributed $12,000 to his RRSP in November 2022 and $10,000 to a spousal RRSP in February 2023. Fred earned income of $80,000 in 2021 and $100,000 in 2022. Fred’s notice of assessment showed unused RRSP deduction room at the end of 2021 of $5,000. His T4 for 2021 showed a pension adjustment (PA) of $3,000. Determine Fred’s maximum RRSP deduction for 2022.
Answer Preview: RRSP deduction: Fred can deduct RRSP contributions of up to $16,400 on his 2022 tax retu…

, Chapter: 7 -Problem: 8 >> An individual invests in a bank term deposit on July 1, 2022. When does the individual recognize the interest income for tax purposes if the investment has a term of three years, with interest compounded annually but paid only at the end of the three-year term? Would your answer be different if the taxpayer were a corporation? Explain.
Answer Preview: The individual must recognize the interest earned to each annivers…

, Chapter: 10 -Problem: 11 >> An individual made charitable donations of $10,000 during 2022. Determine the maximum donation credit available under the following assumptions: (a) The individual’s taxable income is $200,000.(b) The individual’s taxable income is $225,000.
Answer Preview: a. Taxable income $200,000 (under …

, Chapter: 11 -Problem: 1 >> A Canadian corporation with a December year-end incurs the following losses:Determine the expiry date for each of the above losses. Transcribed Image Text: Non-capital loss Non-capital loss Net capital loss Amount $10,000 12,000 16,000 Year Incurred 2021 2010 2008
Answer Preview: Generally, non-capital losses expire after 20 years. Net ca…

, Chapter: 7 -Problem: 1 >> On April 1, 2022, a corporation with a December 31 taxation year purchased a three-year investment certificate for $20,000. The certificate pays interest only at the end of the three-year term, but the interest is compounded annually at the rate of 10%. Currently, the corporation’s marginal tax rate is 28%. However, in 2023, the marginal tax rate will decrease to 25%. An individual makes the ident
Answer Preview: The actual interest income earned on the investment certificate is: The Individual: The individual c…

, Chapter: 6 -Problem: 6 >> On October 1, 2021, Neo Enterprises Ltd. signed a lease for new office space. The contract gives Neo Enterprises the use of the space for four years with the option of renewing the lease for two additional three-year periods. In November 2021, Neo Enterprises spent $84,000 renovating the office space. In February 2022, they spent an additional $30,000 on leasehold improvements. Neo Enterprises has
Answer Preview: Class 13: Leasehold improvements: The Class 13 CCA is increased by 50% …

, Chapter: 5 -Problem: 8 >> Canadian Enterprises carries on a tax consulting business in Toronto, Ontario. The income statement for 2022 includes a cost of $4,600 for the owner/operator attending three conventions during the year. Each convention includes a cost of $130 per day for meals. For convention #3, in December, airfare of $900 was included in accounts payable at the end of the year.Comment on the deductibility of th
Answer Preview: Convention costs are normally considered capital in nature and therefore not deduc…

, Chapter: 23 -Problem: 5 >> What is the relationship between a capitalization rate and an earnings multiple?
Answer Preview: The capitalization rate, which reflects the relative risk of the investment, …

, Chapter: 13 -Problem: 3 >> Investco Ltd., a private corporation, received dividend income from taxable Canadian corporations at its year-end, December 31, 2022, as follows:Investco Ltd. owns 80% of the issued shares of Subsidiary. Subsidiary’s dividend refund for its year ended December 31, 2022, was $4,000.  Required:Calculate the Part IV tax payable by Investco Ltd. for its year ended December 31, 2022.
Answer Preview: The Part IV tax payable by Investco Ltd. is $26,200, computed as follows [ITA 186(1)]: Subsidi…

, Chapter: 10 -Problem: 5 >> In 2016, Jackson Garza loaned $10,000 to a small business corporation. By the end of 2022, it was established that the loan was bad and that Jackson would not be receiving the $10,000 principal. Jackson has sheltered $4,000 of capital gains with the capital gains deduction in prior years. Determine the tax consequences for Jackson for 2022.
Answer Preview: The $10,000 loan has become a bad debt in 2022. Jackson can make an election under ITA 50(1…

, Chapter: 5 -Problem: 2 >> Carl Fenson of Winnipeg owns three taxicabs that operate for 24 hours a day (two shifts of 12 hours). Carl works one shift himself and hires drivers for the other shifts. In addition to the normal taxi licence, prior to 2022 a special licence was required to deliver passengers to Winnipeg International Airport. This special licence was referred to as a “one-way” licence because it could be used to
Answer Preview: Carl earned business income from the licence sales. The purchase of the three additional airport lic…

, Chapter: 9 -Problem: 3 >> Tom Mendez retired from X Corp. on June 30, 2022, after turning 65 in December 2021. He plans to travel with his spouse, who is 45 years of age. On retirement, Tom received a retiring allowance of $40,000 for his years of loyal service. Tom started his employment with X Corp. in 1990. Determine the income tax consequences of the retiring allowance for Tom.
Answer Preview: ANSWER 1 The retiring allowance of $40,000 received by Tom is considered taxable income and is subje…

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6 Reviews for Canadian Income Taxation 2022/2023 Textbook Questions And Answers