CHAPTER 1 INTRODUCTION TO ee ee ee
FEDERAL TAXATION IN CANADA - KEY
ee ee ee ee ee ee
TERMS QUESTIONS WITH 100%
ee ee ee ee
CORRECT ANSWERS
ee ee
AdvanceeeTaxeeRulinee-eecorrecteeanswer-
Interpretations eeprovided, eeatJthe eerequest eeof eea eetaxpayer, eeby eethe eeIncome eeTax eeRulingsJDirectorate eeas eeto
eehow eea eepar eeticular eetransaction eewill eebe eetreated eefor eetax eepurposes. eeSuch eeinterpretations eeare eenot
eebinding eeon eethe eeCRA.
Allowable eeCapital eeLoss ee- eecorrect eeanswer-The eedeductibleeeportion ee(currently eeone-half) eeof eea eeCapital eeLoss.
BusinessJIncome ee- eecorrect eeanswer-
Income eethat eeisJearned eethrough eeActive eeBusiness eeactivity. eeThis eewould eeinclude eeamountsJearned eeby
eeproducing eego eeods, eesellingJgoods eeor eeservices, eeor eedelivering eeservices. eeWhile eeusage eeisJnot eealways
eeconsistent, eethis eeterm eeusually eer eeefers eeto eea eenet eeamount ee(i.e., eeinclusionsJless eedeductions, eeor eerevenues
eelessJexpenses).
CapitaleeAsset ee-Jcorrect eeanswer-Aneeasset eethat eeis eeheldeefor eethe eepurpose eeofeeproducingJIncome.
Capital eeGainee- eecorrect eeanswer-
The eeexcess eeof eeproceeds eeresultingJfrom eethe eeDisposition eeof eea eecapital eeasset, eeover eethe eesum eeof eethe
eeAdjusted eeCost eeB eease eeof eethe eeasset eeplus eeany eecost eeof eedisposition.
Capital eeLoss ee- eecorrect eeanswer-
The eeexcess eeof eethe eesum eeof eethe eeAdjusted eeCost eeBase eeof eea eecapital eeasset eeplus eeany eecost eeof eedisposition,
eeover eethe eeproce eeedsJresulting eefrom eethe eeDisposition eeof eethe eeasset.
CapitaleeTax ee-eecorrect eeanswer-AeetaxJassessedeeoneetheeecapital eeofeeaeeCorporation, eewithout eeregardeetoeeitseeIncome.
ConsumptioneeTaxee-eecorrecteeanswer-
AJtaxJlevied eeoneetheJconsumption eeof eesome eeproducteeor eeservice. eeThisJtype eeofeetax eeis eealso eecalled eea eesaleseetax.
Customs eeDutiesJ-Jcorrect eeanswer-
Aeetax eeimposedeeoneethe eeimportation eeoreeexportationeeof eecertain eegoodseeoreeservices.
, DivisioneeBeeIncomeJ-Jcorrect eeanswer-Aneealternative eenameeeforeeNeteeIncome eeForeeTaxeePurposes.
Employment eeIncome ee-Jcorrect eeanswer-
The eeSalary, eewages, eeandeeother eeremuneration, eeincluding eegratuities, eereceived eeby eean eeEmployee eein eethe eeyear
ee(see eeE eemployer/Employee eeRelationship).
FiscaleePeriodee-eecorrect eeanswer-Aeetaxationeeyeareethateedoeseenoteeexceedee53eeweeks.
FlateeTaxeeSystemee-eecorrecteeanswer-
AJtaxJoneeIncomeeethateeiseeappliedeeat eetheeesameeerateeetoeealleeTaxpayers,eewithouteeregardeetoeetheeeleveleeofeetheir
eeIncome.
GoodseeAndeeService eeTaxee(GST) ee-eecorrecteeanswer-
Aeetype eeofeeTransaction eeTaxeethat eeis eeassessedeeoneethe eesaleJofeegoods eeandeeservices. eeAseeit eeisJassessed eeateeall
eestages eeof eeth eeeeeproduction/distributioneechain, eetheeetaxeethateeaneeenterpriseeemust eecollect eeand eepay eeto
eetheJgovernment eeiseeoffset eeby eeInput eeTax eeCredits eefor eethe eetax eepaid eeon eethe eevarious eeinputs eerequired eeto
eeproduce eeor eedistribute eethe eegoods eeand eese eervices.
HarmonizedeeSaleseeTaxJ(HST) ee-eecorrect eeanswer-
A eecombined eefederal/provincial eesalesJtax eethat eeis eegenerally eeassessed eeon eethe eesame eebasis eeas eethe eefederal
eeGoods eeAn eed eeServiceJTaxJ(GST). eeThe eecombined eerate eevaries eeacross eetheJprovinces eeand eeis eenotionally eea
eecombination eeof eethe ee5% eeGST eeplus eea eeprovincial eesales eetax eerangingJfrom ee7% eeto ee10%.
HeadeeTaxee-eecorrect eeanswer-Aeetax eeleviedeeoneethe eeIndividualseethat eeareeeincludedeeineea eespecified eeclassification.
Income ee-eecorrect eeanswer-
AJmeasure eeof eeeither eehow eemuch eeaneeentity eehasJearnedeeduring eeaeeperiodeeor, eealternatively, eehow eemucheeits
eenet eewort eeh eehas eeincreased eeduring eea eeperiod. eeAsJthe eeterm eeis eeused eein eeaccounting eeand eetax, eeit eeis eea eerules-
based eecalculation. eeIn eethe eecase eeof eeaccounting, eethe eerules eeare eereferred eeto eeasJgenerally eeaccepted eeaccounting
eeprinc eeiplesJ(GAAP), eewhile eein eetax eethe eerules eeare eefound eein eethe eeIncome eeTax eeAct eeand eeother eesources.
Income eeSplittingee-eecorrecteeanswer-
AJgroup eeof eeTax eePlanning eetechniques eedesigned eeto eedivide eea eegiven eestream eeof eeIncome eeamongJfamily
eemembers eeor eeo eether eerelated eeparties. eeThe eevalue eeof eethese eetechniques eeis eebased eeon eeprogressive eetaxJrates
eewhich eemeansJthat,eeifeeaeest
FEDERAL TAXATION IN CANADA - KEY
ee ee ee ee ee ee
TERMS QUESTIONS WITH 100%
ee ee ee ee
CORRECT ANSWERS
ee ee
AdvanceeeTaxeeRulinee-eecorrecteeanswer-
Interpretations eeprovided, eeatJthe eerequest eeof eea eetaxpayer, eeby eethe eeIncome eeTax eeRulingsJDirectorate eeas eeto
eehow eea eepar eeticular eetransaction eewill eebe eetreated eefor eetax eepurposes. eeSuch eeinterpretations eeare eenot
eebinding eeon eethe eeCRA.
Allowable eeCapital eeLoss ee- eecorrect eeanswer-The eedeductibleeeportion ee(currently eeone-half) eeof eea eeCapital eeLoss.
BusinessJIncome ee- eecorrect eeanswer-
Income eethat eeisJearned eethrough eeActive eeBusiness eeactivity. eeThis eewould eeinclude eeamountsJearned eeby
eeproducing eego eeods, eesellingJgoods eeor eeservices, eeor eedelivering eeservices. eeWhile eeusage eeisJnot eealways
eeconsistent, eethis eeterm eeusually eer eeefers eeto eea eenet eeamount ee(i.e., eeinclusionsJless eedeductions, eeor eerevenues
eelessJexpenses).
CapitaleeAsset ee-Jcorrect eeanswer-Aneeasset eethat eeis eeheldeefor eethe eepurpose eeofeeproducingJIncome.
Capital eeGainee- eecorrect eeanswer-
The eeexcess eeof eeproceeds eeresultingJfrom eethe eeDisposition eeof eea eecapital eeasset, eeover eethe eesum eeof eethe
eeAdjusted eeCost eeB eease eeof eethe eeasset eeplus eeany eecost eeof eedisposition.
Capital eeLoss ee- eecorrect eeanswer-
The eeexcess eeof eethe eesum eeof eethe eeAdjusted eeCost eeBase eeof eea eecapital eeasset eeplus eeany eecost eeof eedisposition,
eeover eethe eeproce eeedsJresulting eefrom eethe eeDisposition eeof eethe eeasset.
CapitaleeTax ee-eecorrect eeanswer-AeetaxJassessedeeoneetheeecapital eeofeeaeeCorporation, eewithout eeregardeetoeeitseeIncome.
ConsumptioneeTaxee-eecorrecteeanswer-
AJtaxJlevied eeoneetheJconsumption eeof eesome eeproducteeor eeservice. eeThisJtype eeofeetax eeis eealso eecalled eea eesaleseetax.
Customs eeDutiesJ-Jcorrect eeanswer-
Aeetax eeimposedeeoneethe eeimportation eeoreeexportationeeof eecertain eegoodseeoreeservices.
, DivisioneeBeeIncomeJ-Jcorrect eeanswer-Aneealternative eenameeeforeeNeteeIncome eeForeeTaxeePurposes.
Employment eeIncome ee-Jcorrect eeanswer-
The eeSalary, eewages, eeandeeother eeremuneration, eeincluding eegratuities, eereceived eeby eean eeEmployee eein eethe eeyear
ee(see eeE eemployer/Employee eeRelationship).
FiscaleePeriodee-eecorrect eeanswer-Aeetaxationeeyeareethateedoeseenoteeexceedee53eeweeks.
FlateeTaxeeSystemee-eecorrecteeanswer-
AJtaxJoneeIncomeeethateeiseeappliedeeat eetheeesameeerateeetoeealleeTaxpayers,eewithouteeregardeetoeetheeeleveleeofeetheir
eeIncome.
GoodseeAndeeService eeTaxee(GST) ee-eecorrecteeanswer-
Aeetype eeofeeTransaction eeTaxeethat eeis eeassessedeeoneethe eesaleJofeegoods eeandeeservices. eeAseeit eeisJassessed eeateeall
eestages eeof eeth eeeeeproduction/distributioneechain, eetheeetaxeethateeaneeenterpriseeemust eecollect eeand eepay eeto
eetheJgovernment eeiseeoffset eeby eeInput eeTax eeCredits eefor eethe eetax eepaid eeon eethe eevarious eeinputs eerequired eeto
eeproduce eeor eedistribute eethe eegoods eeand eese eervices.
HarmonizedeeSaleseeTaxJ(HST) ee-eecorrect eeanswer-
A eecombined eefederal/provincial eesalesJtax eethat eeis eegenerally eeassessed eeon eethe eesame eebasis eeas eethe eefederal
eeGoods eeAn eed eeServiceJTaxJ(GST). eeThe eecombined eerate eevaries eeacross eetheJprovinces eeand eeis eenotionally eea
eecombination eeof eethe ee5% eeGST eeplus eea eeprovincial eesales eetax eerangingJfrom ee7% eeto ee10%.
HeadeeTaxee-eecorrect eeanswer-Aeetax eeleviedeeoneethe eeIndividualseethat eeareeeincludedeeineea eespecified eeclassification.
Income ee-eecorrect eeanswer-
AJmeasure eeof eeeither eehow eemuch eeaneeentity eehasJearnedeeduring eeaeeperiodeeor, eealternatively, eehow eemucheeits
eenet eewort eeh eehas eeincreased eeduring eea eeperiod. eeAsJthe eeterm eeis eeused eein eeaccounting eeand eetax, eeit eeis eea eerules-
based eecalculation. eeIn eethe eecase eeof eeaccounting, eethe eerules eeare eereferred eeto eeasJgenerally eeaccepted eeaccounting
eeprinc eeiplesJ(GAAP), eewhile eein eetax eethe eerules eeare eefound eein eethe eeIncome eeTax eeAct eeand eeother eesources.
Income eeSplittingee-eecorrecteeanswer-
AJgroup eeof eeTax eePlanning eetechniques eedesigned eeto eedivide eea eegiven eestream eeof eeIncome eeamongJfamily
eemembers eeor eeo eether eerelated eeparties. eeThe eevalue eeof eethese eetechniques eeis eebased eeon eeprogressive eetaxJrates
eewhich eemeansJthat,eeifeeaeest
