Exam (elaborations)
TAX 301 CHAPTER 9 PRACTICE EXAM
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TAX 301 CHAPTER 9 PRACTICE EXAM....
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An individual owns shares with an FMV that is greater than their ACB. Theindividual wishes to transfer ownership of the shares to their spouse. How can
the individual avoid having the income from these shares attributed back to
them? What are the income tax consequences if the income attribution rules
apply?
-individual must opt out of the spousal rollover which is accomplished by
reporting the gain on the shares in the individual income tax return for the year
of the transfer based on the FMV of the shares at the time
-spouse must provide consideration for the shares that is equal to the FMV of
the shares received
-consideration must either be provided out of the spouse's own funds but can
also be a promissory note that pays interest at the prescribed interest rate or
higher
-If income attribution applies, the IT consequences would be that any income
earned by the recipient spouse would be attributed back to the individual
transferor
-if the recipient spouse sells the shares, any capital gain or loss on the sale
would also be attributed back to the individual transferor
T/F? Workers' Compensation payments are included in net income, but
deducted in the determination of taxable income.
True. Workers' Compensation payments are included in net income but are
deducted in the determination of taxable income. The result is that none of the
amounts are actually subject to income tax.
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T/F? Moving expenses can only be deducted to the extent of employment
income earned at a new work location.
False. They can also be deducted against business income and scholarships,
bursaries and research grants to the extent there is an amount required to be
included in net income.
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