Tax Assign Sol

TAXATION

Question 1

a. 2)

b. 1)

c. 3)

d. 3)

e. 2)

f. 3)

g. 3)

Deemed dividend — 8,000 – 1,000 = 7,000 × 1.25 = 8,750

Allowable Business Inv. Loss — 1/2 (1,000 – 10,000) = 4,500

h. 4)

i. 1)

j. 4)

k. 4)

L. 4)

m. 1)

n. 2)

o. 4)

Question 2

a. 2)

b. 4)

c. 3)

d. 4)

j. 2)

k. 2)

l. 2)

m. 4)

n. 1)

o. 2)

106. Answer: d.

As Tom is not a GST registrant and his revenue does not exceed $30,000, he is not permitted to charge his patients GST.

107. Answer: a.

The Manufacturing and Processing Profits Deduction is limited to the corporation’s manufacturing and processing profits not eligible for the small business deduction.

108. Answer: c.

Proceeds of disposition $300,000

Less:

Adjusted cost base $110,000

Disposition costs 8,000 118,000

Total capital gain $182,000

Non-taxable (1/2) 91,000

Total taxable capital gain $91,000

109. Answer: a.

($60,000)(.02)(12) = $14,400.

110. Answer: b.

Dividend @ 5% ($30,000) $1,500

Gross up 25 % 375

Taxable dividend 1,875

Federal tax (29%) (544)

Dividend tax credit ($375) x 2/3 250

Federal tax payable $ 294

Therefore, after tax income = $1,500 - $294 = $1,206.

111. Answer: a.

A person who either enters or leaves Canada part way through the year on a permanent basis is a part-year resident rather than a deemed resident.

112. Answer: d.

The annual business limit determines the maximum amount of income that is eligible for the small business deduction.

113. Answer: d.

Because the proceeds were greater than the undepreciated capital cost, there is no loss for tax purposes. Because the proceeds were less than the capital cost, there is no capital gain. However, there is recapture of...