CH.1 INTRODUCTION TO FEDERAL TAXATION IN CANADA QUESTIONS WITH CORRECT ANSWERS

CH.1 INTRODUCTION TO FEDERAL
TAXATION IN CANADA QUESTIONS
WITH CORRECT ANSWERS |LATEST
UPDATE|
Who's required to pay income tax? - correct answer-Residents of Canada

Non-residents who:

- earn business or employment income in Canada

- realize gains on dispositions of certain types of property connected to Canada



How is income tax payable determined for an individual? - correct answer-
Step 1: Net income (Division B)

Step 2: Taxable income (Division C)

Step 3: Gross tax

Step 4: Personal tax credits



Taxable entities in Canada - correct answer-Individuals, corporations, and trusts

(Partnerships aren't a taxable entity, the income earned is taxed in the hands of the members)



Tax Exempt Entities - correct answer-
Municipal governments, labour organizations, registered charities, RRSP's, RESP's (Registered Education
Savings Plan), TFSAs (Tax-Free Savings Accounts)



Resource Allocation - correct answer-tax revenues use to provide public goods and services



Distribution Effects (Redistribution) - correct answer-Federal tax system redistributes income and wealth



Stabilization Effects - correct answer-
Tax policy used to encourage economic expansion, increase employment, and maintain inflation level

, FiscalAFederalismA-AcorrectAanswer-AllocateAresourcesAamongAdifferentAgovernmentAlevels



ProgressiveASystemA-AcorrectAanswer-

taxArateAincreasesAasAtheAtaxAbaseAincreasesAMoreAmoneyAmade,AmoreAmoneyApaid

Example:AIncomeATax



RegressiveASystemA-AcorrectAanswer-
NoAmatterAyourAincome,AyouApayAtheAsameAasAeveryoneAelseA(meaningAtaxAaffectsAlowerAincomeAindividu
AalsAmoreAthanAhighAincomeAindividuals)



Example:AHSTA($1.50AonAaApizzaAdoesn'tAharmAsomeoneAwhoAearnsA$1.5MAaAyear,AbutAcanAforAsomeoneA
wAhoAearnsA$40k)



FlatATaxARateASystemA-AcorrectAanswer-
AtAaA0%AtaxArate,AtheAgovernmentAearnsAnothing.AAtAaAhighAtaxArate,AtheAgovernmentAgetsAaAlowAamount.
AThere'sAaAsweetAspotAforAaAtaxArateAwhereApeopleAdon'tAmindApayingAtax,AbutAifAyouApushApastAthat,Athey

'llAjustApayAcashAorAsomethingAbecauseAtheyAcan'tAaffordAto/don'tAwantAtoApayAthatAtax.

LikeAaAregressiveAsystem,AthisAbenefitsAtheArich.



DivisionsA-AcorrectAanswer-

DivisionAA:ALiabilityAforATaxA(ITAA2)ADivisionAB:ANetAincomeA(IT

AA3-108)

DivisionAC:ATaxableAincomeA(ITAA109-114)

DivisionAD:ATaxableAincome,Anon-residentA(ITAA115-

116)ADivisionAE:ATaxesAPayableA(ITAA117-127)



WhenAmightAaAnon-residentAbeAtaxedAinACanada?A-AcorrectAanswer-InAtheAtaxationAyear,Athey:

- wereAemployedAinACanada

- carriedAonAaAbusinessAinACanada

- disposedAofAaAtaxableACanadianAproperty