Test Bank for Byrd & Chen's Canadian Tax Principles Volume 2 By Gary Donell Clarence | Complete All Chapters 2024/2025 | Newest Version

Test Bank for Byrd & Chen's Canadian Tax Principles Volume 2 By Gary Donell Clarence | Complete All Chapters 2024/2025 | Newest Version. List two types of income that would not be subject to the tax on split income (TOSI). Answer: The two items that are specifically mentioned in the text are employment income and compound income resulting from the re-investment of split income amounts. Other items (e.g., dividends from publicly traded shares), could also be mentioned if they do not fall within the definition of split income. Type: ES Topic: Tax on split income (TOSI) 18) Under the TOSI legislation, what is the meaning of the term Excluded Business? Answer: Amounts received from an Excluded Business are not considered to be Split Income and are not subject to the TOSI. An Excluded Business is one in which the individual taxpayer is actively engaged on a regular, continuous, and substantial basis. This active engagement must be in the current year or in at least 5 prior taxation years. Note, however, the years do not have to be current or consecutive. That is, any 5 years of active engagement will satisfy this condition. The TOSI rules add what is referred to as a "bright line test" that considers an individual to have met the level of involvement in the business if they work in the business at least 20 hours a week during the period in the year in which the business is carried on. Type: ES Topic: Tax on split income (TOSI) 19) Under the TOSI legislation, what is the meaning of the term Excluded Shares? Answer: For shares to be classified as Excluded Shares, the individual must be 25 years of age or older and must own, in terms of both FMV and voting rights, at least 10% of the outstanding shares of the corporation. In addition, the corporation must meet the following conditions: • It must not be a professional corporation. • Less than 90% of its income in the previous year was from providing services. • Less than 10% of its income in the previous year was from a related business. Type: ES Topic: Tax on split income (TOSI) 20) Under the TOSI legislation, in determining whether an amount of income represents a reasonable return, the test for individuals age 25 or over is different than the test for individuals between 18 and 24. Describe this difference. Answer: For individuals 25 years of age or older, the measurement of a Reasonable Return requires consideration of labour contributions, capital contributions, as well as the assumption of business risk. For individuals between the age of 18 and 24, the reasonableness test is more restrictive. It does not take into consideration either active engagement in the business or business related risk assumed. It is based solely on capital contributions to the business. Type: ES Topic: Tax on split income (TOSI) 21) Under what circumstances can dividends be transferred from a spouse or common-law partner to the other spouse or common-law partner? Answer: Dividends can be transferred from a spouse or common-law partner if the result is to create or increase the amount of the spousal tax credit. Type: ES Topic: Transfer of dividends to a spouse - ITA 82(3) 22) Briefly describe the four major categories of charitable donations. Answer: As presented in the text, the descriptions are as follows: 1. Total Charitable Gifts is defined to include all eligible amounts donated by an individual to a registered charity, a registered Canadian amateur athletic association, a Canadian municipality, the United Nations or an agency thereof, a university outside of Canada which normally enrolls Canadian students, and a charitable organization outside of Canada to which Her Majesty in right of Canada has made a gift in the year or in the immediately preceding year. 2. Total Crown Gifts is defined as the aggregate of eligible amounts donated to Her Majesty in right of Canada (the Federal government) or to a province or territory. 3. Total Cultural Gifts is defined as the aggregate of all eligible gifts of objects that the Canadian Cultural Property Export Review Board has determined meet the criteria of the Cultural Property and Import Act. 4. Total Ecological Gifts is defined as all eligible gifts of land certified by the Minister of the Environment to be ecologically sensitive land, the conservation and protection of which is important to the preservation of Canada's environmental heritage. The beneficiary of the gift must be a Canadian municipality or a registered charity, the primary purpose of which is the conservation and protection of Canada's environmental heritage. Type: ES Topic: Charitable donations - general rules 23) If a taxpayer is donating non-depreciable capital property with a FMV that exceeds its ACB, a taxpayer can elect any amount between the FMV and ACB amount of the donation. Why is it generally appropriate to elect the higher FMV amount? Answer: Donations in excess of $200 provide the donor with a federal tax credit equal to either 29% or 33% of the amount of the donation (the rate depends on the taxable income of the individual). If the donation involves a non-depreciable capital property, electing the higher FMV will result in a capital gain, only onehalf of which will be included in income. This means that the effective income tax rate for an individual in the highest federal income tax bracket on the excess amount elected is only 16.5% [(1/2)(33%)]. This assures the individual that the value of the federal credit resulting from the extra amount elected will usually be double the increase in federal income tax on the resulting capital gain. Type: ES Topic: Charitable donations - general rules 24) Capital gains resulting from donations of publicly listed shares are, in general, deemed to be nil. Why is an additional rule required to avoid taxing income resulting from gifts of publicly listed shares that have been acquired through stock options? Answer: When there is a disposition of publicly listed shares that have been acquired through stock options, the difference between the FMV at the time the shares were exercised and the option price at which they were acquired is treated as employment income, not as a capital gain.While the general rule under ITA 38(a.1) deems capital gains on such donations to be nil, a special rule is required to exempt the employment income which may arise on such dispositions. The solution takes the form of an additional one-half deduction under ITA 110(1)(d.01) which completely offsets the remaining employment stock option benefit amount. Type: ES Topic: Charitable donations - general rules 25) Compare the income tax treatment of foreign tax credits on foreign non-business income with the income tax treatment of tax credits on foreign business income for individuals. Answer: Both credits are based on the lesser of the amount withheld and an amount determined by the following formula: [Foreign Non-Business Income ÷ Adjusted Division B Income][Tax Otherwise Payable] The differences are as follows: • For individuals, the figure used for the amount withheld for the non-business foreign credit is limited to 15% of the foreign non-business income. Any amount of withholding in excess of 15% becomes a deduction in the determination of net income (ITA 20(11). There is no such limit on the actual amount for the foreign business income credit. • When the amount withheld on foreign business income exceeds the amount that can be deducted, the excess foreign tax credit can be carried back 3 years and forward 10 years to apply against tax payable in those years. The taxpayer may decide instead to claim any excess as a net income deduction (ITA 20(12)). • The foreign business income credit is further limited by the amount of tax otherwise payable, reduced by any foreign non-business tax credit taken in the year. In effect, the credit is the least of the actual amount withheld, the amount determined by the formula, and tax otherwise payable reduced by any foreign non-business tax credit. Type: ES Topic: Foreign tax credits - general rules 26) The alternative minimum tax (AMT) is an attempt to deal with an income tax policy issue. What is this issue and, in general terms, how does the AMT deal with this issue? Answer: The income tax policy issue is the fact that some individuals, through the use of tax privileges and preferences (e.g., capital gains deduction, the non-taxable component of capital gains, or employee stock option deductions) can wind up paying little or no tax, despite having significant income. The AMT deals with this by requiring an alternative calculation of income in which these tax privileges and preferences are neutralized by adding them back to income. After the deduction of a basic $40,000 exemption, the minimum income tax rate of 15% is applied to the balance. If the result is an income tax payable amount that exceeds the regular income tax calculation, then the AMT must be paid. Any excess of the AMT over the regular federal income tax payable can be carried forward for up to seven years to be applied against any future excess of regular federal income tax payable over the AMT for that carryover year. Type: ES Topic: Alternative minimum tax - general concepts 27) If an individual has no loss carry overs from other years, the current year net income will be equal to taxable income. Answer: FALSE Explanation: There are other deductions that can create a difference between net income and taxable income. Type: TF Topic: Taxable income 28) An individual has a non-capital loss. It can be carried back three years and forward indefinitely. Answer: FALSE Explanation: It can be carried back 3 years and forward 20 years. Type: TF Topic: Losses - non-capital loss 29) An individual sells shares in a Canadian controlled private corporation that qualifies as a small business corporation to an arm's length person. The ACB of the shares is $50,000 and they are sold for $30,000. The $20,000 loss is an Allowable Business Investment Loss. Answer: FALSE Explanation: The Allowable Business Investment Loss is $10,000 [(1/2)($20,000)]. Type: TF Topic: Allowable business investment losses 30) A corporation sold a long-term investment in common shares with an ACB of $25,000, for $10,000 in the current year. It also sold land that is considered capital property with an ACB of $8,000, for $12,000. Its net capital loss for the current year is $11,000. Answer: FALSE Explanation: Its net allowable capital loss for the year is $5,500 [(1/2)($11,000)]. Type: TF Topic: Losses - net capital loss 31) Net capital losses can be carried forward or back, but can only be deducted to the extent of net taxable capital gains in the carry back or carry forward year. Answer: TRUE Explanation: Net capital losses can only be carried forward or back to be deducted against net taxable capital gains. Type: TF Topic: Losses - net capital loss 32) Jennifer Nash is a plumber in Waterloo, Ontario, who spends all of her weekends and holidays operating a farm she purchased this year. She is confident that within two years her farm will be making a profit. In the current year, the farm had a loss of $18,000. In the current year, she can deduct a maximum of $2,500 of the farm loss against other income. Answer: FALSE Explanation: In the current year, she can deduct a maximum of $10,250 [$2,500 + (1/2)($18,000 - $2,500)] of the farm loss against other income. Type: TF Topic: Losses - restricted farm losses ITA 31 33) Jennifer Nash is a plumber in Waterloo, Ontario, who spends all of her weekends and holidays operating a farm she purchased this year. She is confident that within two years her farm will be making a profit. In the current year, the farm had a loss of $18,000. In the current year, she can deduct $10,250 of the farm loss against other income but the remaining loss of $7,750 [$18,000 - $10,250] can only be carried forward for 7 years. Answer: FALSE Explanation: Any loss that is not deductible in the current year can be carried forward for a maximum of 20 years. Type: TF Topic: Losses - restricted farm losses ITA 31 34) Jennifer Nash is a plumber in Waterloo, Ontario, who spends all of her weekends and holidays operating a farm she purchased this year. She is confident that within two years her farm will be making a profit. In the current year, the farm had a loss of $18,000. Any loss that is not deductible in the current year can only be applied to the extent of farm income in the carry over year. Answer: TRUE Explanation: A restricted farm loss can only be used to the extent of farm income in the carry over period. Type: TF Topic: Losses - restricted farm losses ITA 31 35) In 2022, an individual, who has never claimed the capital gains deduction, has taxable capital gains on the disposition of shares in a qualified small business corporation (QSBC shares). The capital gains deduction can be used to eliminate up to $456,815 of the taxable capital gains on the disposition. Answer: TRUE Explanation: The $456,815 deduction can be used towards taxable capital gains arising on the disposition. Type: TF Topic: Capital gains deduction - general rules 36) If a 10 year old child receives dividends from a private company all of the shares of which are owned by the mother, it will always be subject to the tax on split income (TOSI). Answer: TRUE Explanation: There are no Excluded Amounts in this type of situation. Type: TF Topic: Tax on split income (TOSI) 37) If a 22 year old Specified Individual receives dividends from a private company in which the individual owns 20% of the FMV of the company shares and 20% of its voting shares, the dividends will not be subject to the Tax On Split Income (TOSI). Answer: FALSE Explanation: For the shares to be Excluded Shares, the Specified Individual must be 25 years of age or older. Type: TF Topic: Tax on split income (TOSI) 38) Dividends received by the spouse of an individual can be transferred to that individual and included in net income and excluded from the income of the spouse. Answer: TRUE Explanation: ITA 82(3) only allows such transfers when the spousal credit is either created or increased for the other spouse or common-law partner. Type: TF Topic: Transfer of dividends to a spouse - ITA 82(3) 39) When an individual makes a gift of publicly listed shares to a registered charity, any capital gain that results from the disposition is deemed to be nil. Answer: TRUE Explanation: Any gain would be deemed to be nil. Type: TF Topic: Charitable donations - general rules 40) The base for the charitable donations tax credit is always limited to 75% of an individual's net income. Answer: FALSE Explanation: The limit also includes 25% of any capital gains resulting from the donation and 25% of any recapture that results from the donation. Type: TF Topic: Charitable donations - general rules 41) An individual owns bonds issued in a foreign country. Tax of $2,000 is withheld in that country from the gross interest of $10,000. The foreign tax credit cannot exceed $1,500. Answer: TRUE Explanation: For individuals, the foreign tax credit cannot exceed 15% of the foreign investment income. In this case it is $1,500. The remaining $500 would be a net income deduction under ITA 20(11). Type: TF Topic: Foreign tax credits - general rules 42) Individuals with taxable income in excess of $300,000 will always pay some amount of AMT. Answer: FALSE Explanation: Regardless of their income level, individuals will only pay the AMT if they have some amount of what the legislation refers to as preference items (e.g., losses on tax shelters, capital gains deduction etc). Type: TF Topic: Alternative minimum tax - general concepts 43) An excess of AMT over regular federal income tax payable can be carried forward for up to 7 years to be applied against any future excess of regular federal income tax payable over the AMT in the carryover year. Answer: TRUE Type: TF Topic: Alternative minimum tax - general concepts 44) Martin is worried about how much income tax he will have to pay this year and he is looking for anything that he might have missed that will generate a taxable income deduction. All of the following could decrease his taxable income, with the exception of: A) the capital gains deduction. B) the deduction of a net capital loss. C) the deduction of a non-capital loss. D) a credit for a charitable donation. Answer: D Explanation: D) A credit for a charitable donation. Type: MC Topic: Taxable income 45) Which of the following would generate a taxable income deduction? A) A non-capital loss. B) A charitable donation carried forward from a previous year. C) Adoption expenses. D) Medical expenses. Answer: A Explanation: A) A non-capital loss carried forward from a previous year. Type: MC Topic: Taxable income 46) Shelly is seeking your advice on how she can claim various deductions and credits. Which of the following items would generate a taxable income deduction? i. A net capital loss. ii. A charitable donation. iii. Contributions to an RESP. iv. Stock option deduction. A) i, ii, and iv B) ii and iv C) i and iv D) i, iii, and iv Answer: C Explanation: C) i and iv. Type: MC Topic: Taxable income 47) Reuben Chechetto had to take his employer to court in 2022, to sue for wages owing to him over an 8 year period ending in 2022. In 2022, he receives a court settlement of $80,000, representing $10,000 for each of the eight years. In all years, Reuben had taxable income of $60,000. What are the income tax consequences be with respect to the receipt of $80,000 in back wages in 2022? A) Mr. Chechetto will have to include the full $80,000 in additional employment income in 2022. There are no choices. B) As these funds were awarded through a court settlement, they are not required to be included in income. C) Mr. Chechetto can use a special relief mechanism in the ITA which will have the effect of spreading the lump-sum payment over a maximum period of 5 years. D) Mr. Chechetto can use a special relief mechanism in the ITA which will have the effect of spreading the lump-sum payment over the 8 taxation years affected. Answer: D Explanation: D) Mr. Chechetto can use a special relief mechanism in the ITA which will have the effect of spreading the lump-sum payment over the 8 taxation years affected. Type: MC Topic: Lump-sum payments - ITA 110.2 EMAIL ME: For help with report, Assignment, Essay and thesis writing. 48) Which of the following statements with respect to loss carry overs is NOT correct? A) Losses on the disposition of listed personal property can be carried back 3 years and forward 7 years. B) Restricted farm losses can only be claimed in the carryover period in which there is farm income. C) Net capital losses cannot be deducted in years in which net income is nil, even if there are taxable capital gains in that year. D) If an individual can deduct either a $10,000 non-capital loss or a $10,000 net capital loss, the effect on taxable income of deducting either is the same. Answer: C Explanation: C) Net capital losses cannot be deducted in years in which net income is nil, even if there are taxable capital gains in that year. Type: MC Topic: Loss carry overs - general concepts 49) Which of the following statements is correct with respect to the disposition of a valuable coin collection? A) If a loss occurs, it cannot be deducted against any type of income. B) If a loss occurs, one-half of this amount can be applied against one-half of any capital gain. C) If a capital gain occurs, one-half of this amount can be offset by allowable capital losses on the disposition of any type of capital property. D) If a capital gain occurs, it will not be included in income because this is personal use property. Answer: C Explanation: C) If a capital gain occurs, one-half of this amount can be offset by allowable capital losses on the disposition of any type of capital property. Type: MC Topic: Loss carry overs - general concepts 50) As a part time employee, Derek earns $20,000 per year of employment income. He recently started up his own business as a sole proprietor. For the current year, his business revenues were $12,000 and his business expenses were $28,000. Derek has some investments that resulted in taxable dividend income of $1,400 and related interest expense of $2,000. Assuming this accounts for all of Derek's income, what is his non-capital loss for the year? A) Nil. B) $600. C) $3,400. D) $16,000. Answer: A Explanation: A) Nil. [ITA 3(a) & (c) = $20,000. ITA 3(d) = $16,600 (business loss $16,000 + property loss from investments of $600 ($2,000 - $1,400). Net income = $3,400. ITA 3(d) does not exceed the ITA 3(c) amount. Type: MC Topic: Losses - non-capital loss 51) With respect to net capital loss, which of the following statements is NOT correct? A) In the year of death when such losses are deducted, the amount deducted will be based on the capital gains inclusion rate which applied in the year in which the loss was realized. B) When such losses are carried back, they can be deducted only to the extent of net taxable capital gains arising in the carry back period. C) Such losses can be carried back three years. D) Such losses can be carried forward for a maximum of 20 years. Answer: D Explanation: D) Such losses can be carried forward for 20 years. Type: MC Topic: Losses - net capital loss 52) Daria is a part time employee who recently started up her own business as a sole proprietor. For the current year, she had the following types of income and loss: Part time employment income $15,000 Business loss 18,000 Taxable (grossed up) dividend income 1,200 Interest expense on loan to purchase investments 2,000 Capital gain 12,000 Capital loss 16,000 What is her non-capital loss carry forward for the year? A) $3,000. B) $3,800. C) $5,800. D) $18,000. Answer: B Explanation: A) $3,000 [ $18,000 - $15,000] B) $3,800. [$18,000 + ($1,200 - $2,000)] - $15,000 (ITA 3(c) amount) C) $5,800. [deducts the full allowable capital loss of $8,000 D) $18,000. Type: MC Topic: Losses - non-capital loss 53) For which of the following types of losses is it not necessary to segregate the loss by type in order to track the balance carried forward as a separate balance? A) Net capital losses. B) Limited Partnership Losses. C) Restricted farm losses D) Business losses. Answer: D Explanation: D) Business losses. Type: MC Topic: Loss carry overs - general concepts 54) Under which set of circumstances would it be advisable to utilize a loss carry over to reduce taxable income to nil in the carry over year? A) When the taxpayer is carrying a loss back to a prior year, taxable income can be reduced to nil without negative consequences. B) When the taxpayer is carrying a loss forward, taxable income can be reduced to nil without negative consequences. C) Net capital losses are the only type of loss that should be used to reduce taxable income to nil in the carry over year. D) It is never advisable to use a loss carry over to reduce taxable income to nil in the carry over year. Answer: D Explanation: D) It is never advisable to use a loss carry over to reduce taxable income to nil in the carry over year. This is particularly the case for individuals who have personal tax credits that could offset the income tax on a certain amount of taxable income, Type: MC Topic: Loss carry overs - general concepts 55) Which of the following types of losses cannot be carried forward for at least 20 years? A) Listed personal property losses. B) Non-capital losses. C) Net capital losses. D) Restricted farm losses. Answer: A Explanation: A) Listed personal property losses. Type: MC Topic: Loss carry overs - general concepts 56) Tabari has income from employment of $25,000 during the year. As well, he has a capital gain on Listed Personal Property of $8,000 on the sale of a stamp collection, and a capital gain from the sale of some shares of $6,000. Last year, he had a capital loss on Listed Personal Property of $10,000 that he was unable to use and carried forward to the current year. What is his net income for the year? A) $27,000. B) $28,000. C) $31,000. D) $32,000. Answer: B Explanation: A) $27,000. [deducts full amount of LPP loss] B) $28,000. [$25,000 + (1/2)($8,000) +(1/2)($6,000) - (1/2)($8,000) (LPP loss carry forward can only be used against LPP gains in calculation of net income)] C) $31,000. [does not apply 50% inclusion rate to capital gain] D) $32,000. [does not deduct any of LPP loss, thinking it is deducted after net income has been determined, or that LPP losses are not deductible.] Type: MC Topic: Loss carry overs - general concepts 57) Zina Chaburi has a full time job as a nurse in her local hospital. In her spare time she has a goat farming operation. The goat farm began in 2021, which resulted in a loss of $10,000. She deducted the maximum allowable amount against her 2021 income. In 2022, most of the problems had been worked out, and Zina had realized a profit from the farm operation of $5,000, as well as employment income of $90,000. Determine Ms. Chaburi's minimum taxable income for 2022. A) $85,000. B) $88,750. C) $91,250. D) $95,000. Answer: C Explanation: A) $85,000. [$90,000 + $5,000 - $10,000 deducts full amount of farm loss carry forward in 2022] B) $88,750. [$90,000 + $5,000 - $6,250 (full amount of restricted farm loss carry forward deducted)] C) $91,250. [$90,000 + $5,000 — carry forward of $3,750). Deducted $6,250 [$2,500 + (1/2)($10,000 - $2,500) in 2021. This leave a carry forward of $3,750 ($10,000 - $6,250) D) $90,000 + $5,000 Type: MC Topic: Losses - restricted farm losses ITA 31 58) In 2019, Lorrie Meller used the capital gains deduction to offset a $10,000 taxable capital gain. In 2022, she had employment income of $50,000, a capital gain of $26,000, and a capital loss of $30,000 that meets the qualification for treatment as a business investment loss. What is the amount of Lorrie's 2022 taxable income? A) $45,000 B) $58,000 C) $46,000 D) $48,000 Answer: D Explanation: A) $45,000 ($50,000 - $5,000) B) $58,000 ($50,000 + $13,000 - $5,000) C) $46,000 ($50,000 + $26,000 - $20,000 - $10,000) D) $48,000 Loss on Disposition $30,000 Disallowed by use of ITA 110.6 ( 20,000) Business Investment Loss $10,000 Inclusion Rate 1/2 Allowable Business Investment Loss $5,000 Employment Income $50,000 Taxable Capital Gain [(1/2)($26,000)] $13,000 Disallowed Loss [(1/2)($20,000)] ( 10,000) 3,000 Allowable Business Investment Loss ( 5,000) 2022 Net Income and Taxable Income $48,000 Type: MC Topic: Allowable business investment losses 59) Which of the following statements about Allowable Business Investment Losses is correct? A) They are losses that result from the disposition of shares or debt in a Canadian controlled public corporation. B) They can only be deducted against business income. C) If they are not used during the current year, they become part of a net capital loss for the year. D) If they are not used during the current year, they become part of the non-capital loss for the year. Answer: D Explanation: D) If they are not used during the current year, they become part of the non-capital loss for the year. Type: MC Topic: Allowable business investment losses 60) With respect to an Allowable Business Investment Loss (ABIL), which of the following statements is NOT correct? A) An ABIL can be deducted against any type of income. B) If not used during the current year, an ABIL can only be applied against net taxable capital gains in the carry over period. C) An ABIL results from an arm's length disposition of shares of a small business corporation. D) An ABIL is the deductible portion of a Business Investment Loss. Answer: B Explanation: B) If not used during the current year, an ABIL can only be applied against net taxable capital gains in the carry over period. Type: MC Topic: Allowable business investment losses 61) Which of the following statements with respect to the capital gains deduction is correct? A) For purposes of calculating this deduction, the annual gains limit is reduced by the amount of the individual's CNIL. B) It is always preferable to deduct net capital loss carry overs prior to making any use of the capital gains deduction C) In 2022, the maximum deduction for QSBC shares is different than the maximum deduction for qualified farm and fishing property (QFP). D) The cumulative gains limit includes the annual gains limits for all previous years, but not for the current year. Answer: C Explanation: C) In 2022, the maximum deduction for QSBC shares is different than the maximum deduction for qualified farm and fishing property (QFP). Type: MC Topic: Capital gains deduction - general rules 62) Which of the following transactions could result in an individual taxpayer being able to claim a capital gains deduction? A) An individual sells 100% of the shares of a CCPC that uses 85% of its assets in carrying on an active business in Canada. B) An individual sells 15% of the shares of a CCPC that uses 95% of its assets in carrying on an active business in Canada. C) A CCPC sells 100% of the shares of another CCPC that uses 100% of its assets in the carrying on of an active business. D) An individual sells 25% of the shares of a CCPC that uses 30% of its assets to earn income from property. Answer: B Explanation: B) An individual sells 15% of the shares of a CCPC that uses 95% of its assets in the carrying on of an active business in Canada. C) Corporations cannot use the capital gains deduction. Type: MC Topic: Capital gains deduction - general rules 63) With respect to the capital gains deduction, which of the following statements is NOT correct? A) The deduction is only available to individuals. B) The Cumulative Gains Limit is reduced by any CNIL balance at the end of the year. C) The Annual Gains Limit is reduced by Allowable Business Investment Losses realized during the year. D) The deduction is available on any disposition of shares or debt of a qualified small business corporation. Answer: D Explanation: D) The deduction is available on any disposition of QSBC shares but not debt. Type: MC Topic: Capital gains deduction - general rules 64) Which of the following is NOT a requirement for shares to qualify as QSBC shares? A) At the time the shares are sold, the corporation must use all or substantially all of its assets in an active business primarily carried on in Canada. B) More than 50% of the FMV of the assets of the business must have been used in an active business throughout the preceding 24 months. C) The shares must not have been owned by a related person in the past 24 months. D) The shares must not have been owned by a non-related person in the past 24 months. Answer: C Explanation: C) The shares must not have been owned by a related person in the past 24 months. Type: MC Topic: Capital gains deduction - shares of a QSBC