1. Which of the following is included in employment income for tax
purposes?
A) Employer-paid group life insurance premiums
B) Reimbursement of travel expenses
C) Employer-paid tuition for job-related course
D) Personal use of employer’s car
ANS: Answer: D) Personal use of employer’s car
Explanation:
The personal use of an employer’s car is considered a taxable benefit and must
be included in employment income. Group life insurance premiums and tuition
for job-related courses may be non-taxable under certain conditions.
2. What is the maximum RRSP contribution room for the 2025 tax year if
earned income in 2024 was $80,000?
A) $18,000
B) $14,400
C) $29,210
D) $16,800
ANS: Answer: B) $14,400
Explanation:
RRSP contribution room is 18% of earned income, up to an annual maximum.
$80,000 × 18% = $14,400 (within the 2025 limit).
3. Capital losses can be used to:
,A) Offset employment income
B) Offset business income
C) Offset capital gains
D) Offset dividend income
ANS: Answer: C) Offset capital gains
Explanation:
Capital losses can only be applied against capital gains, not other income types
like employment or business income.
4. Which of the following is NOT a deductible expense for a sole
proprietor?
A) Advertising costs
B) Personal groceries
C) Salaries to employees
D) Business license fees
ANS: Answer: B) Personal groceries
Explanation:
Personal expenses are not deductible. Only expenses incurred to earn income
are deductible.
5. Which of the following qualifies as a non-refundable tax credit?
A) Canada Workers Benefit
B) Tuition amount
C) GST/HST credit
D) Old Age Security (OAS)
ANS: Answer: B) Tuition amount
Explanation:
Tuition amounts are non-refundable tax credits; they reduce the amount of tax
payable but do not result in a refund if they exceed taxes owed.
6. What is the inclusion rate for capital gains in Canada for individuals?
,A) 25%
B) 50%
C) 75%
D) 100%
ANS: Answer: B) 50%
Explanation:
50% of a capital gain is included in taxable income.
7. A taxpayer received a $2,000 gift from their employer. How is this
treated for tax purposes?
A) Fully taxable
B) Non-taxable if under $500
C) Non-taxable if cash
D) Partially taxable
ANS: Answer: A) Fully taxable
Explanation:
Cash gifts from an employer are fully taxable to the employee regardless of the
amount.
8. Which one of the following is taxable income?
A) Inheritance
B) Canada Child Benefit
C) Lottery winnings
D) Employment bonus
ANS: Answer: D) Employment bonus
Explanation:
Employment bonuses are taxable. The other items listed are non-taxable sources
of income in Canada.
9. A self-employed taxpayer earns $100,000 in net income. How much must
they contribute to CPP (approximate 2025)?
, A) $2,000
B) $3,500
C) $5,500
D) $6,999
ANS: Answer: D) $6,999
Explanation:
Self-employed individuals pay both the employee and employer portions of
CPP. Based on 2025 rates, it’s approx. 11.9% on income over the basic
exemption.
10. Which of the following is NOT included in business income?
A) Sale of goods
B) Inventory appreciation
C) Service revenue
D) Consulting fees
ANS: Answer: B) Inventory appreciation
Explanation:
Unrealized gains (like inventory appreciation) are not included until realized
through sale.
11. What is the basic personal amount for the 2025 tax year (Federal)?
A) $13,229
B) $15,000
C) $12,000
D) $16,140
ANS: Answer: D) $16,140
Explanation:
The federal basic personal amount for 2025 is $16,140, indexed annually for
inflation.
12. Which of the following would be considered a taxable benefit?
purposes?
A) Employer-paid group life insurance premiums
B) Reimbursement of travel expenses
C) Employer-paid tuition for job-related course
D) Personal use of employer’s car
ANS: Answer: D) Personal use of employer’s car
Explanation:
The personal use of an employer’s car is considered a taxable benefit and must
be included in employment income. Group life insurance premiums and tuition
for job-related courses may be non-taxable under certain conditions.
2. What is the maximum RRSP contribution room for the 2025 tax year if
earned income in 2024 was $80,000?
A) $18,000
B) $14,400
C) $29,210
D) $16,800
ANS: Answer: B) $14,400
Explanation:
RRSP contribution room is 18% of earned income, up to an annual maximum.
$80,000 × 18% = $14,400 (within the 2025 limit).
3. Capital losses can be used to:
,A) Offset employment income
B) Offset business income
C) Offset capital gains
D) Offset dividend income
ANS: Answer: C) Offset capital gains
Explanation:
Capital losses can only be applied against capital gains, not other income types
like employment or business income.
4. Which of the following is NOT a deductible expense for a sole
proprietor?
A) Advertising costs
B) Personal groceries
C) Salaries to employees
D) Business license fees
ANS: Answer: B) Personal groceries
Explanation:
Personal expenses are not deductible. Only expenses incurred to earn income
are deductible.
5. Which of the following qualifies as a non-refundable tax credit?
A) Canada Workers Benefit
B) Tuition amount
C) GST/HST credit
D) Old Age Security (OAS)
ANS: Answer: B) Tuition amount
Explanation:
Tuition amounts are non-refundable tax credits; they reduce the amount of tax
payable but do not result in a refund if they exceed taxes owed.
6. What is the inclusion rate for capital gains in Canada for individuals?
,A) 25%
B) 50%
C) 75%
D) 100%
ANS: Answer: B) 50%
Explanation:
50% of a capital gain is included in taxable income.
7. A taxpayer received a $2,000 gift from their employer. How is this
treated for tax purposes?
A) Fully taxable
B) Non-taxable if under $500
C) Non-taxable if cash
D) Partially taxable
ANS: Answer: A) Fully taxable
Explanation:
Cash gifts from an employer are fully taxable to the employee regardless of the
amount.
8. Which one of the following is taxable income?
A) Inheritance
B) Canada Child Benefit
C) Lottery winnings
D) Employment bonus
ANS: Answer: D) Employment bonus
Explanation:
Employment bonuses are taxable. The other items listed are non-taxable sources
of income in Canada.
9. A self-employed taxpayer earns $100,000 in net income. How much must
they contribute to CPP (approximate 2025)?
, A) $2,000
B) $3,500
C) $5,500
D) $6,999
ANS: Answer: D) $6,999
Explanation:
Self-employed individuals pay both the employee and employer portions of
CPP. Based on 2025 rates, it’s approx. 11.9% on income over the basic
exemption.
10. Which of the following is NOT included in business income?
A) Sale of goods
B) Inventory appreciation
C) Service revenue
D) Consulting fees
ANS: Answer: B) Inventory appreciation
Explanation:
Unrealized gains (like inventory appreciation) are not included until realized
through sale.
11. What is the basic personal amount for the 2025 tax year (Federal)?
A) $13,229
B) $15,000
C) $12,000
D) $16,140
ANS: Answer: D) $16,140
Explanation:
The federal basic personal amount for 2025 is $16,140, indexed annually for
inflation.
12. Which of the following would be considered a taxable benefit?
