CSC Chapter 24 - Canadian Taxation
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, if any
5. Calculate the net tax payable - ✔✔ correct answer Income tax calculation 5 step process
XX includes wages, salary, and benefits, alone or combined. It is taxed on a gross receipt basis, which
means that taxpayers cannot deduct all costs incurred in earning this type of income for tax purposes.
However, they are allowed to deduct a few employment-related expenses such as pension contributions,
union dues, and childcare expenses - ✔✔ correct answer employment
xx is any income earned from producing and selling goods or rendering services. Self-employment
income falls under this category. Business income is taxed on a net-income basis, which means that,
unlike employees, business owners are allowed to deduct all costs incurred in earning the income. Those
costs include business-related expenses such as rent or mortgage, employee payroll, and the cost of
supplies and equipment. - ✔✔ correct answer business income
Income from property includes interest income, dividends, and royalties. This income derives from assets
purchased solely for investment purposes, such as stocks, bonds, and mutual funds. (Note: Income from
rental properties is included in this category, but it is not covered in this course.) - ✔✔ correct answer
Income from securities and other assets purchased for investment
A capital gain or capital loss occurs when a taxpayer sells property. Any increase in value over the
purchase price is a capital gain; any decrease is a capital loss. A capital gain is taxed only after the
property is sold, in the year it is sold. Tax is not paid year by year as the property gains value. A capital
gain is typically calculated as the sale price, minus any selling expenses (such as the commission on the
sale of stocks), minus the adjusted cost base (which is generally composed of the purchase price plus
commission expense at the time of purchase). - ✔✔ correct answer Capital gains and losses
Adding the provincial rate to the federal rate gives the taxpayer's combined xx, which is the rate at which
tax must be paid on each additional dollar of income earned. - ✔✔ correct answer marginal tax rate
A xx tax credit is available on publicly-traded dividend-paying shares of taxable Canadian companies. This
credit makes the purchase of these shares relatively attractive, compared to interest-paying securities. -
✔✔ correct answer dividend
, CSC Chapter 24 - Canadian Taxation
• 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 - ✔✔ correct answer Tax rules permit
individuals to deduct certain expenses used for the purpose of earning income from property. These
deductible expenses are called carrying charges for tax purposes. The following carrying charge
deductions are considered acceptable:
• 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, 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 - ✔✔ correct answer The following charges cannot be deducted from
investment income:
Number of shares sold x selling price = - ✔✔ correct answer gross proceeds from sale
number of shares purchased x purchase price + commission paid = - ✔✔ correct answer adjusted cost
base
(gross proceeds - adjusted cost base - commission on sale) x 0.5 - ✔✔ correct answer taxable capital gain
(order 1 x purchase price per share + commission 1
order 2 x purchase price per share + commission 2) / total shares purchased = - ✔✔ correct answer
adjusted cost base of additional shares
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, if any
5. Calculate the net tax payable - ✔✔ correct answer Income tax calculation 5 step process
XX includes wages, salary, and benefits, alone or combined. It is taxed on a gross receipt basis, which
means that taxpayers cannot deduct all costs incurred in earning this type of income for tax purposes.
However, they are allowed to deduct a few employment-related expenses such as pension contributions,
union dues, and childcare expenses - ✔✔ correct answer employment
xx is any income earned from producing and selling goods or rendering services. Self-employment
income falls under this category. Business income is taxed on a net-income basis, which means that,
unlike employees, business owners are allowed to deduct all costs incurred in earning the income. Those
costs include business-related expenses such as rent or mortgage, employee payroll, and the cost of
supplies and equipment. - ✔✔ correct answer business income
Income from property includes interest income, dividends, and royalties. This income derives from assets
purchased solely for investment purposes, such as stocks, bonds, and mutual funds. (Note: Income from
rental properties is included in this category, but it is not covered in this course.) - ✔✔ correct answer
Income from securities and other assets purchased for investment
A capital gain or capital loss occurs when a taxpayer sells property. Any increase in value over the
purchase price is a capital gain; any decrease is a capital loss. A capital gain is taxed only after the
property is sold, in the year it is sold. Tax is not paid year by year as the property gains value. A capital
gain is typically calculated as the sale price, minus any selling expenses (such as the commission on the
sale of stocks), minus the adjusted cost base (which is generally composed of the purchase price plus
commission expense at the time of purchase). - ✔✔ correct answer Capital gains and losses
Adding the provincial rate to the federal rate gives the taxpayer's combined xx, which is the rate at which
tax must be paid on each additional dollar of income earned. - ✔✔ correct answer marginal tax rate
A xx tax credit is available on publicly-traded dividend-paying shares of taxable Canadian companies. This
credit makes the purchase of these shares relatively attractive, compared to interest-paying securities. -
✔✔ correct answer dividend
, CSC Chapter 24 - Canadian Taxation
• 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 - ✔✔ correct answer Tax rules permit
individuals to deduct certain expenses used for the purpose of earning income from property. These
deductible expenses are called carrying charges for tax purposes. The following carrying charge
deductions are considered acceptable:
• 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, 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 - ✔✔ correct answer The following charges cannot be deducted from
investment income:
Number of shares sold x selling price = - ✔✔ correct answer gross proceeds from sale
number of shares purchased x purchase price + commission paid = - ✔✔ correct answer adjusted cost
base
(gross proceeds - adjusted cost base - commission on sale) x 0.5 - ✔✔ correct answer taxable capital gain
(order 1 x purchase price per share + commission 1
order 2 x purchase price per share + commission 2) / total shares purchased = - ✔✔ correct answer
adjusted cost base of additional shares
