Income Tax

1.  A.   Bill and Jenny   B.   Francis and Darien   C.   Judy and Philip

  Bill and Jenny have been living together for 23 consecutive months. Francis and Darien have been living together for 25 consecutive months, but have lived apart for the last four months due to a breakdown in their relationship. Judy and Philip have been living together for three months and Philip is the adoptive parent of Judy’s child. Which couple CANNOT designate each other as a common-law partner on their income tax returns?

D.  all of the above

2.   Larry gave 1,000 units of an equity fund to his wife, Belinda; another 1,000 units to his brother, Steven; and 1,000 units to his 12-year old son, Max. During the first year, the equity fund distributed capital gains, dividend income and interest income. What statement is true?

A.   Larry does not have to report the interest income earned by Steven.

B.   Larry must report the capital gains earned by Max.

C.   Larry does not have to report the dividend income earned by Belinda.

D.  Any dividend income attributed to Larry is not eligible for the dividend gross up and tax credit scheme.

3.   Celia is self-employed. What item reported by Celia on her tax return might make her susceptible to the alternative minimum tax?’

A.   CCA claimed to reduce Celia’s self-employment income

B.   Celia’s RRSP catch-up contribution

C.   the taxable capital gain Celia realized upon selling investment real estate

D.  the interest expense Celia incurred on a loan she used to purchase equipment for her business

4.   Conner’ws tax return for two years ago was supposed to be filed by April 30th of last year. Conner did not file the return until September 13th of this year. At that time, he owed $14,200 in taxes. How much of a late-filing penalty ill Conner incur?

A.   $710

 

B.   $1,704

 

C.   $2,414

 

D.  $3,124

 

 

 

5.   After completing his T1 general income tax return, Frank calculated his basic federal tax to be $35,900. Frank also completed an AMT return and calculated his minimum amount after adjustments for non-refundable tax credits as $42,650. What statement is FALSE?

A.   Frank has to pay federal tax of $42,650 before surtaxes.

 

B.   Frank has a minimum tax carryover of $6,750.

 

C.   If Frank calculates his basic federal tax next year to be $26,400 and his AMT to be $22,300, he can reduce his basic federal tax payable to $19,650 by applying the AMT carryover.

 

D.  The minimum tax carryover can be used in any of the following seven years.

 

 

 

6.   Frank has a marginal tax rate of 46%, but he expects to be in a significantly lower tax bracket when he retires in four years. Frank currently earns substantially more than he spends. He also recently inherited $100,000 that he is looking to invest. What option provides Frank with tax advantages suitable to his tax profile, while also minimizing the risk to his other assets?

A.   purchasing a 5-year strip bond

 

B.   investing in preferred shares

 

C.   becoming a general partner in a start-up business

 

D.  investing in a CCPC established by his brother

 

 

 

7.   Hank is over 85 years old and he is thinking about distributing some of his wealth now, instead of waiting until he dies. What scenario could result in the attribution of property income to Hank?

A.   a gift to his brother, who is 68 years of age

 

B.   a gift to his granddaughter, who is 16 years of age

 

C.   a gift to his niece, who is 44 years of age

 

D.  a gift to his daughter, who is 61 years of age