 |
1 | |
Which of the following is not one of the three basic areas that distinguish a Canadian-controlled private corporation from other corporations? |
| | A) | Rates of tax |
| | B) | Double taxation |
| | C) | Primary relationships |
| | D) | Secondary relationships |
|
|
2 | |
Which of the following statements does not correctly describe matters related to active business income? |
| | A) | Active business income would include the selling of services in a profession. |
| | B) | The payment of a salary to a shareholder to reduce income over $200,000 would reduce double taxation. |
| | C) | The first $200,000 of annual active business income is entitled to a reduction in federal taxes by 16%. |
| | D) | The unused portion of the small business deduction is available for carry-over to other years. |
|
|
3 | |
Which of the following amounts would not be included in a corporation's capital dividend account? |
| | A) | Non-taxable portion of life insurance proceeds. |
| | B) | Non-taxable portion of Canadian dividends received. |
| | C) | Non-taxable portion of net capital gains. |
| | D) | Non-taxable portion of gains on eligible capital property. |
|
|
4 | |
Which of the following statements does not correctly describe matters related to the taxation of intercorporate dividends? |
| | A) | Corporations are connected when there is intercorporate ownership of more than 10%. |
| | B) | Dividends received from non-connected corporations must pay a Part IV tax of 33 1/3%. |
| | C) | Part IV taxes are fully refundable when the dividends are distributed to shareholders as dividends. |
| | D) | Dividends received from connected corporations must pay a Part IV tax of 6 2/3%. |
|
|
5 | |
Which of the following is a disadvantage of incorporating a business? |
| | A) | Dividends are paid by a corporation, and received by a shareholder, only when declared. |
| | B) | Losses of an incorporated business can not be offset against a shareholder's other income. |
| | C) | The risk of business failure can be reduced during its early stages. |
| | D) | A shareholder can also be an employee of a corporation. |
|
|
6 | |
A CCPC in the retailing business with 8 staff has taxable income of $180,000 in 20X1 which excludes Canadian dividend income of $10,000 and includes interest income of $15,000. An associated corporation has used $30,000 of the annual limit. What amount can it claim for the small business deduction in 20X1? |
| | A) | $0 |
| | B) | $24,800 |
| | C) | $26,400 |
| | D) | $32,000 |
|
|
7 | |
A CCPC in the real estate rentals business with 4 staff has taxable income of $80,000 in 20X1 which excludes Canadian dividend income of $5,000 and includes interest income of $2,000. An associated corporation has used $130,000 of the annual limit. What amount can it claim for the small business deduction in 20X1? |
| | A) | $0 |
| | B) | $11,200 |
| | C) | $12,480 |
| | D) | $12,800 |
|
|
8 | |
A CCPC received taxable dividends from public corporations of $18,000. It also received taxable dividends of $6,000 and capital dividends of $3,000 from a connected CCPC. What amount must be paid in Part IV tax? |
| | A) | $6,000 |
| | B) | $7,000 |
| | C) | $8,000 |
| | D) | $9,000 |
|
|
9 | |
Company A, a CCPC, owns 25% of the voting shares of Company B, a CCPC. Company B earns active business income that is subject to the small business deduction and investment income that is taxed at the high corporate rate, of which a portion is refundable on payment of dividends. At Company B's year-end, dividends of $15,000 are paid and a refund of $2,500 is triggered. What amounts of Part I and Part IV tax must Company A pay on this income? |
| | A) | Part I tax of $1,688 and Part IV tax of $625 |
| | B) | Part I tax of $3,750 and Part IV tax of $625 |
| | C) | Part I tax of $0 and Part IV tax of $625 |
| | D) | Part I tax of $0 and Part IV tax of $3,750 |
|
|
10 | |
For what type or range of income would you be indifferent to paying a salary or a dividend to the sole shareholder of a CCPC? |
| | A) | Income eligible for the Manufacturing and Processing deduction |
| | B) | First $200,000 |
| | C) | $200,000 - $300,000 |
| | D) | Over $300,000 |
|
2003 McGraw-Hill Higher Education