ACCT 240 - Chapter 1 Canadian Income Tax exam with complete solutions.
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Course
Income tax
Institution
Income Tax
What is the CRA
Canada Revenue Agency: is a federal government agency that is tasked with the responsibility of administering the Income Tax Act (ITA). It does NOT establish tax policies. The department of Finance analyses and designs tax policies.
Administering the ITA involves: (5)
1) In...
ACCT 240 - Chapter 1 Canadian Income
Tax exam with complete solutions
What is the CRA - ANSWER- Canada Revenue Agency: is a federal government
agency that is tasked with the responsibility of administering the Income Tax Act
(ITA). It does NOT establish tax policies. The department of Finance analyses and
designs tax policies.
Administering the ITA involves: (5) - ANSWER- 1) Interpreting the spirit of the ITA
and developing processes to ensure the spirit is followed by taxpayers of Canada
2)Creating, upholding and collecting forms for reporting income by various
taxpayers (individuals, corps, trusts)
3) Assess taxation based on the provisions of the ITA and administer an appeal
process for taxpayers who dispute assessment of taxation
4) Collection of income and other taxes
5) Enforcement of authority to impose fines and penalties for non-compliance of
the provisions of the ITA
Who is Liable for Income tax? - ANSWER- -IT is payable by every person resident
in canada at any time of the year. Residents are taxed on their world income
-Non-residents must pay tax on their Canadian sourced income
Types of Canadian Sourced Income (3 examples) - ANSWER- -Canadian
employment income
-Canadian business income
-Income from the disposal of Canadian property
A person includes... - ANSWER- -An individual
-A corporation
-Trusts
, --> NOT proprietorships or partnerships
Residency is defined in the ITA: True or False - ANSWER- False, residency is not
defined in the ITA. The courts have had to determine residency for tax purposes.
The courts have established that an individual is resident of the country where
he/she regularly lives.
Factual resident - ANSWER- The CRA uses this term which means that, although
a person left Canada, they are still considered to be a resident of Canada for
Income tax purposes.
-taxation is one worldwide income
-residency is NOT citizenship
-residency is reassessed annually
-"continuing state of relationship" with Canada
Residence of an individual: types of ties that are must be considered in
determining whether an individual is a resident or non-resident: (2) - ANSWER- 1)
Significant residential ties to Canada
2)Secondary residential ties to Canada
Significant Primary residential ties to Canada Include: - ANSWER- 1) a home in
Canada - Dwelling
2) a spouse or common law partner in Canada
3) dependants in Canada
Strong evidence that an ongoing relationship exists
Secondary residential ties that may be relevant include: - ANSWER- 1) personal
property in canada (car, boat, furniture)
2)social ties in canada (memberships, religious org)
3)economic ties in Canada, such as Canadian bank accounts or credit cards
4)a Canadian driver's license or passport
5)Health insurance with a Canadian province or territory
Even if promary ties dont indicate residency, secondary ties might. These are just
a few examples.
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