Key Concept Quiz


1	A small business owner should be aware of tax consequences of operations throughout the year.
		A)	True
		B)	False


2	The Canada Customs and Revenue Agency requires that income taxes be remitted only once a year for proprietorships, partnerships and corporations.
		A)	True
		B)	False


3	An entrepreneur might defer taxes because:
		A)	Tax laws may change in the future
		B)	One has the use of the money during the deferral
		C)	He/she cannot afford the tax
		D)	A and B


4	The federal tax system for individuals in Canada is:
		A)	Flat
		B)	Progressive
		C)	Non-existent
		D)	None of the above


5	What does income splitting mean?
		A)	Splitting the owner's salary payments between two calendar years
		B)	Splitting income between two companies in order to reduce tax payments
		C)	Splitting income among family members to reduce overall tax liability
		D)	B and C


6	Which of the following expenses is tax deductible?
		A)	Expenses incurred to incorporate the business
		B)	Expenses incurred for a car rental used to meet clients
		C)	Expenses incurred to prepare a personal tax return
		D)	Expenses incurred to advertise in the United States


7	Which of the following expenses is not tax deductible?
		A)	Expenses incurred to advertise in Canada
		B)	Expenses incurred on business loan interest payments
		C)	Expenses incurred to purchase office equipment
		D)	Expenses incurred to incorporate the business


8	What important tax management lesson did Gord and Brenda Bushell of Three Buoys Houseboat lean in 1988?
		A)	Do not build a business around government tax programs
		B)	Income splitting can greatly reduce an individual's tax burden
		C)	Not all business expenses are tax deductible
		D)	Deferring taxes can temporarily free up much needed cash


9	The small business deduction:
		A)	Applies to the first $200,000 of annual small business income
		B)	Applies to the first $500,000 of annual small business income
		C)	Applies only if annual income does not exceed $600,000
		D)	None of the above


10	The manufacturing and processing deduction provides for an additional reduction of _________ in tax liability for those businesses that qualify.
		A)	16%
		B)	17%
		C)	10%
		D)	7%


11	_______ allows for a deferral of part of the business profits that have been registered for payment in the future to employees.
		A)	Bonus deferral
		B)	Employee payment deferral
		C)	Deferred profit sharing
		D)	Deferred registered payment program


12	In a proprietorship and partnership, payment to the owner is a deductible expense.
		A)	True
		B)	False


13	If a small business has sales less than ______ no GST collection and remittance is required.
		A)	$40,000
		B)	$400,000
		C)	$300,000
		D)	$30,000


14	The government calculates the annual GST remittance for small businesses and then notifies them of the required payment.
		A)	True
		B)	False


15	_______ allows an increased depreciation rate to be applied to non-cash expenses of certain asset classes in the calculation of taxable income.
		A)	Capital cost allowance
		B)	CCRA
		C)	Investment tax deductions
		D)	SRTC

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