Taxation final mcq with
correct questions and
answers
usr
[COMPANY NAME] [Company address]
,1. Which of the following tax treatments would not be used in
examining debt and equity capitalization alternatives?
Multiple Choice
The return on the invested capital.
The re-invested capital after the loans or shares are
disposed of. Correct
The return of all or a portion of the original capital to the investor.
Losses on the disposition of the loans or shares. Answer: The re-invested capital
after the loans or shares are disposed of.
2. When a Canadian corporation is capitalized by the purchase of
treasury shares, it would be incorrect to say....
Multiple Choice
All funds paid by the corporation back to the purchasers would be
included in their taxable income.
Correct
Any loss on the subsequent sale of the shares would be treated as
a capital loss.
There would be no tax consequences to the existing shareholders.
The stated capital or paid-up capital of the shares would equal the
amount the corporation received for the shares. Answer: All funds paid by the
corporation back to the purchasers would be included in their taxable income.
3. Which of the following results in no immediate income to the
existing share- holders?
The admission of new shareholder by the existing shareholders
selling some of their shares.
The corporation buying back some of the existing shareholders'
shares. The corporation admitting the new shareholder by
issuing them treasury shares.
Correct
The paying of dividends to the existing shareholders to reduce the
,purchase
, price to the new shareholders. Answer: The corporation admitting the new shareholder by
issuing them treasury shares.
4. Which of the following properties does not qualify for the section
85 election of transferring/selling property to a corporation at tax
cost?
Multiple Choice
Capital property
Inventory
Real property held for resale
Resource property Answer: Real property held for resale
5. In the capitalization of a small business corporation that earns active
business income eligible for the small business deduction (SBD), why
would share capital most likely be preferred over interest-bearing
shareholder loans?
Multiple Choice
Shares are easier to dispose of.
Dividend income is taxed at a lower rate because of the dividend
tax credit. The immediate tax paid by the corporation and the
shareholder is lower.
Interest income is fully taxed to the shareholder. Answer: The immediate tax paid
by the corporation and the shareholder is lower.
6. Which of the following would apply to corporations?
Multiple Choice
They are a separate entity for both legal and tax purposes.
The year-end must be December 31 for tax purposes irrespective of
its year end for accounting purposes.
The controlling shareholders would be considered the owners of
both the shares of the corporation and the underlying assets of
the corporation.
correct questions and
answers
usr
[COMPANY NAME] [Company address]
,1. Which of the following tax treatments would not be used in
examining debt and equity capitalization alternatives?
Multiple Choice
The return on the invested capital.
The re-invested capital after the loans or shares are
disposed of. Correct
The return of all or a portion of the original capital to the investor.
Losses on the disposition of the loans or shares. Answer: The re-invested capital
after the loans or shares are disposed of.
2. When a Canadian corporation is capitalized by the purchase of
treasury shares, it would be incorrect to say....
Multiple Choice
All funds paid by the corporation back to the purchasers would be
included in their taxable income.
Correct
Any loss on the subsequent sale of the shares would be treated as
a capital loss.
There would be no tax consequences to the existing shareholders.
The stated capital or paid-up capital of the shares would equal the
amount the corporation received for the shares. Answer: All funds paid by the
corporation back to the purchasers would be included in their taxable income.
3. Which of the following results in no immediate income to the
existing share- holders?
The admission of new shareholder by the existing shareholders
selling some of their shares.
The corporation buying back some of the existing shareholders'
shares. The corporation admitting the new shareholder by
issuing them treasury shares.
Correct
The paying of dividends to the existing shareholders to reduce the
,purchase
, price to the new shareholders. Answer: The corporation admitting the new shareholder by
issuing them treasury shares.
4. Which of the following properties does not qualify for the section
85 election of transferring/selling property to a corporation at tax
cost?
Multiple Choice
Capital property
Inventory
Real property held for resale
Resource property Answer: Real property held for resale
5. In the capitalization of a small business corporation that earns active
business income eligible for the small business deduction (SBD), why
would share capital most likely be preferred over interest-bearing
shareholder loans?
Multiple Choice
Shares are easier to dispose of.
Dividend income is taxed at a lower rate because of the dividend
tax credit. The immediate tax paid by the corporation and the
shareholder is lower.
Interest income is fully taxed to the shareholder. Answer: The immediate tax paid
by the corporation and the shareholder is lower.
6. Which of the following would apply to corporations?
Multiple Choice
They are a separate entity for both legal and tax purposes.
The year-end must be December 31 for tax purposes irrespective of
its year end for accounting purposes.
The controlling shareholders would be considered the owners of
both the shares of the corporation and the underlying assets of
the corporation.
