Question

1. In 2019, the shareholder of a Canadian public corporation received cash dividends of $4,000, and interest from bonds of $20,000. They sold shares for $40,000 that had an adjusted cost base (ACB) of $8,000. They had prior year net capital losses of $3,500 carry forward. What would be the amount of the individual's net income for tax purposes?

a. $56,640

b. $57,520

c. $41,520

d. $40,640

2.Individual H received eligible dividends totaling $15,000 in the current year. What is the amount of the federal dividend tax credit?

a. $4,105

b. $1,105

c. $3,105

d. $2,105

3. ABC. Ltd. had an unused allowable capital loss of $20,000 during the current fiscal year and an unused business loss of $10,000. ABC Ltd. has a December 31 year-end. Which of the following statements is TRUE?

a. All of the losses will be lost if not used in this fiscal year.

b. The unused allowable capital loss will become a net-capital loss and can be carried back three years and forward indefinitely, and the unused business loss will become a non-capital loss and can be carried back three years and forward twenty years.

c. The unused business loss will become a net-capital loss and can be carried back three years and forward indefinitely, and the unused allowable capital loss will become a non-capital loss and can be carried back three years and forward twenty years.

d. The unused business loss will become a non-capital loss and can be carried back three years and forward indefinitely.

4. Which of the following types of losses can be carried forward indefinitely?

a. Rental losses

b. Property losses

c. Non-capital losses

d. Net capital losses

5. Joan made a political contribution in the amount of $1,500. What would be her federal political contribution tax credit?

a. $1,125

b. $500

c. $650

d. $725

6. Which of the following is not classified as a special reduction for an individual for taxation purposes?

a. Stock option deduction

b. Lifetime capital gain deduction

c. Losses not utilized in other years

d. Charitable donations

Canada tax law

Answer 1

Answer-1

b. $57,520

Explanations:-

Particulars	Amount ($)
Interest from bonds	20,000
Cash Dividends ($4,000*138%)	5,520
Capital Gain ($40,000-$8,000)	32,000
Net Income	57,520

Answer-2

c. $3,105

Explanations:-

To calculate the federal dividend tax credit, the total dividends received by the percentage specified by the Canada Revenue Agency (CRA) are 38% for eligible dividends.

= $15,000 * 1.38

= $20,700

The federal dividend tax credit as a percentage of taxable dividends is 15.0198% for eligible dividends

Federal dividend tax credit = $20,700*0.150198

= $3,109 (Approx. $3,105)

Answer-3

b. The unused allowable capital loss will become a net-capital loss and can be carried back three years and forward indefinitely, and the unused business loss will become a non-capital loss and can be carried back three years and forward twenty years.

Answer-4

d. Net Capital Losses

Explanations:-

Net capital losses can be carried back three years or forward indefinitely but can only be used to offset capital gains.

Answer-5

c. $650

Explanations:-

Federal political contributions are donations that were made to a registered federal political party. You can receive up to 75 percent of your first $400 of donation as credit, followed by 50 percent of any amount between $400 and $750 and 33.3 percent of amounts over $750. The maximum amount of the credit is capped at $650.

Federal Political Contribution Tax Credit = ($400*75%) + ($350*50%) + ($750*33.33%)

= $725

But restricted up to $650. Hence the Federal Political Credit is $650

Answer-6

c. Losses not utilized in other years