Chapter 22 Canadian Taxation
What is the five-step process to calculate income tax? - ✔✔ correct answer 1. Calculate all sources of
income
2. Make allowable deductions to arrive at taxable income
3. Calculate the gross or basic tax payable on taxable income
4. Claim allowable tax credits on tax payable
5. Calculate the net tax payable
Can you list and describe the four general types of income? - ✔✔ correct answer Employment Income -
wages
Business Income - selling products (self employ)
Income from Property - rent, dividends, interest
Capital Gains/Losses - stonks/selling property
What is the marginal tax rate? - ✔✔ correct answer tax rate for next dollar you earn
How is interest income taxed? - ✔✔ correct answer at the investor's marginal tax rate, either when it is
received or as it accrues
How is dividend income taxed? - ✔✔ correct answer A dividend tax credit is available on publicly-traded
dividend-paying shares of taxable Canadian companies.
Dividends get 'marked-up' as if companies distributed with EBITDA. Then a tax credit is calculated as a %
of this marked-up dividend income, which reduces ur taxes
How are capital gains taxed? - ✔✔ correct answer 50% of the capital gain is taxable.
, Chapter 22 Canadian Taxation
Capital losses can be used to reduce any capital gains that have been earned
Can you describe how dividend income from a foreign corporation is taxed? - ✔✔ correct answer
Foreign dividends are generally taxed as regular income, in much the same way as interest income.
Can you list four tax-deductible items related to investment income? - ✔✔ correct answer • Interest paid
on funds borrowed to earn such investment income as interest and dividends
• Fees paid for certain investment advice
• Fees paid for management, administration, or safe custody of investments
• Accounting fees paid for the recording of investment income
What are some investment charges that cannot be deducted? - ✔✔ correct answer • Interest paid on
funds borrowed to buy investments that can only generate capital gains
• Brokerage fees or commissions paid to buy or sell securities
• Interest paid on funds borrowed to contribute to a registered retirement savings plan (RRSP), a
registered education savings plan (RESP), a registered disability savings plan (RDSP), or a tax-free savings
account (TFSA)
• Administration, counselling, or trustee fees for a regular or self-directed registered retirement savings
plan, or for a registered retirement income fund (RRIF)
• Fees paid for advice such as financial planning
• Safety deposit box charges
What is the five-step process to calculate income tax? - ✔✔ correct answer 1. Calculate all sources of
income
2. Make allowable deductions to arrive at taxable income
3. Calculate the gross or basic tax payable on taxable income
4. Claim allowable tax credits on tax payable
5. Calculate the net tax payable
Can you list and describe the four general types of income? - ✔✔ correct answer Employment Income -
wages
Business Income - selling products (self employ)
Income from Property - rent, dividends, interest
Capital Gains/Losses - stonks/selling property
What is the marginal tax rate? - ✔✔ correct answer tax rate for next dollar you earn
How is interest income taxed? - ✔✔ correct answer at the investor's marginal tax rate, either when it is
received or as it accrues
How is dividend income taxed? - ✔✔ correct answer A dividend tax credit is available on publicly-traded
dividend-paying shares of taxable Canadian companies.
Dividends get 'marked-up' as if companies distributed with EBITDA. Then a tax credit is calculated as a %
of this marked-up dividend income, which reduces ur taxes
How are capital gains taxed? - ✔✔ correct answer 50% of the capital gain is taxable.
, Chapter 22 Canadian Taxation
Capital losses can be used to reduce any capital gains that have been earned
Can you describe how dividend income from a foreign corporation is taxed? - ✔✔ correct answer
Foreign dividends are generally taxed as regular income, in much the same way as interest income.
Can you list four tax-deductible items related to investment income? - ✔✔ correct answer • Interest paid
on funds borrowed to earn such investment income as interest and dividends
• Fees paid for certain investment advice
• Fees paid for management, administration, or safe custody of investments
• Accounting fees paid for the recording of investment income
What are some investment charges that cannot be deducted? - ✔✔ correct answer • Interest paid on
funds borrowed to buy investments that can only generate capital gains
• Brokerage fees or commissions paid to buy or sell securities
• Interest paid on funds borrowed to contribute to a registered retirement savings plan (RRSP), a
registered education savings plan (RESP), a registered disability savings plan (RDSP), or a tax-free savings
account (TFSA)
• Administration, counselling, or trustee fees for a regular or self-directed registered retirement savings
plan, or for a registered retirement income fund (RRIF)
• Fees paid for advice such as financial planning
• Safety deposit box charges
