Questions and Answers of Canadian Income Taxation

Alex, Brook, and Charlene each began their own sole proprietorship in a GST province on January 1, 20X4. The following chart summarizes their revenue for the first two years of activity: Additional
Who is required to register for GST/HST?
Mr. Jones owns 100% of the commons shares of JL Corp, a CCPC engaged in an active business. The FMV of these shares is $900,000 and they have an ACB and PUC of $100,000. Mr. Jones wishes to
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
Corporation A, a Canadian-controlled private corporation, earns 8% of its net active business income from providing technology services to Corporation B. A’s total active business income is
Smallco Ltd, a Canadian-controlled private corporation, earned $300,000 of active business income in 20X9 of which $35,000 was service income from Bigco Ltd. Smallco is owned 60% by individual A and
TV Ltd. paid non-eligible dividends of $90,000 and capital dividends of $30,000 in the current year. Income tax reference: ITA 129(1). Determine the dividend refund for the current year using the
Can the elective option be used when one corporation transfers property to another corporation?
What is a buy-back of corporate shares?
An individual made charitable donations of $10,000 during the current year. Income tax reference: ITA 118.1(3).Determine the maximum donation credit available under the following assumptions:(a) The
Father, age 67, owns 84% of the common shares of Opco. Mother owns 8%. The remaining 8% is owned by their son, age 22, who works full-time in the business with Father. Mother has no involvement in
Calculate net income for tax purposes for each of the three taxpayers. Income tax reference: ITA 3.Taxpayer ATaxpayer BTaxpayer CEmployment income $30,000 Business income
Briefly explain why an individual who receives dividends from a Canadian corporation must include 115% (in 2019, 116% in 2018) or 138% of the dividend received in income for tax purposes, while a
Carol received salary of $60,000 during the current year. In addition she earned commission income of $25,000 of which she received $15,000 in the current year. She received the remaining $10,000 in
Can the owner of an incorporated business reduce the overall tax burden by having his two children own shares of the corporation through a trust? The corporation would pay dividends to the trust and
Steve 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
The following reserves appear in the financial statements of B Ltd. for the current year:Allowance for doubtful accountsWarranty claimsContingent liability with respect to an upcoming union
A Ltd. incurred the following legal fees with respect to its business for the current year: Representation to the Federal government
A taxpayer’s tax liability was $1,200 for 20X1, $12,000 for 20X2, and is expected to be $36,000 for 20X3. Is the taxpayer required to make tax instalments for 20X3 and if so, what are the
When corporate tax rates are 13% and tax rates for individuals are 40%, is it always better for the individual to transfer his or her business to a corporation?

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