Canadian Tax Principles; Introduction To Federal Taxation In Canada Questions With Correct Answers

CANADIAN TAX PRINCIPLES: INTRODUCTION
TO FEDERAL TAXATION IN CANADA QUESTIONS
WITH CORRECT ANSWERS

Advance tax rulingJ- correct answer-
Interpretations provided, atJthe request of a taxpayer, by the Income Tax RulingsJDirectorate as to how a par
ticular transaction will be treated for tax purposes; such interpretations are not binding on the CRA



Allowable capital loss -Jcorrect answer-The deductible portion (currently one-half) of a capital loss



BusinessJincome - correct answer-
Income that isJearned through active business activity; includes amounts earned by producing goods, sellin
g goods or services, or deliveringJservices; usually refers to a net amount



Capital assetJ- correct answer-An assetJthat is held for the purpose of producingJincome



Capital gain - correct answer-
The excess of proceeds resultingJfrom the disposition of a capital asset, over the sumof the adjusted cost ba
se of the asset plus any costs of disposition



Capital loss - correct answer-
The excess of the sum of the adjusted cost base of a capital asset plus any costs of disposition, over the proce
edsJresulting from the disposition of the asset



Capital tax - correct answer-AJtaxJassessed on the capital of a corporation, without regard to its income



Consumption tax - correct answer-
A taxJlevied on theJconsumption of some product or service; alsoJcalled a sales tax



Customs duties - correct answer-
AJtaxJimposed on the importation or exportation of certain goods or services

, DivisionB income - correct answer-Analternative name for net income for tax purposes
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Fiscal period - correct answer-Ataxation year that doesnot exceed 53 weeks
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Flat tax system- correct answer-
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AJtaxJonincome that isJapplied at the same rate to all taxpayers, without regardto the level of their income
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HeadtaxJ-Jcorrect answer-A tax levied on individuals that are included in a specified classification
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Income - correctJanswer- X2 X2




A measure of either how much an entity hasJearned during a period or, alternatively, how much its net wort h
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has increased during a period
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Income splitting - correctJanswer- X2 X2 X2




A group of tax planning techniques designed to divide a given stream of income among family members or o the
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r related parties; based on progressive taxJrates which meansJthatJif a stream of income can be divided in to sma
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ller streams, a larger portion will be taxed at lower rates, resulting in aggregate tax savings
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Income tax - correct answer-A tax onthe income of certaindefined entities
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Income tax application rules -Jcorrect answer- X2 X2 X2 X2 X2




AJset of rules designed toJdeal with transitional problemsJassociated with the introduction of capital gains ta xa
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tion in 1972 X2 X2




Income tax folios- correct answer- X2 X2 X2 X2 X2




AJCRA publication providing the interpretation of various technical issues related to income taxes; will gradu all
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y replace the CRA's interpretation bulletins
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Income tax regulations - correct answer- X2 X2 X2 X2 X2




A set of rules concerning administration and enforcement of the Income Tax Act; one of the major issues cov er
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ed is CCAJrates and procedures
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