Question

In: Accounting

Which of the following does not provide an accurate description of refundable​ taxes? A. The basic...

Which of the following does not provide an accurate description of refundable​ taxes?

A. The basic concept of refundable taxes is that a portion of the corporate tax paid on investment income is refunded to the corporation when the income is distributed to shareholders in the form of dividends.

B. One purpose of refundable taxes is to keep corporate tax rates high to discourage accumulation of investment income in a corporation.

C. The only purpose for refundable taxes is to create perfect integration in the Canadian tax system.

D. There are three different components of tax that can be refunded on the payment of​ dividends: Refundable portion of Part I​ tax, Additional Refundable Tax on Investment​ Income, and Part IV tax.

Solutions

Expert Solution

C. The basic concept of refundable tax is not to create a perfect integration in the Canadian tax system. Hence it does not provide an accurate description of refundable taxes.

Canada tax system is built on the concept of integration between the corporations and their shareholders. In other words, the shareholders earning investment income in a corporation should pay the same amount of tax on that investment income as they would otherwise pay if such income was earned personally. The integration is carried out through the concept refundable tax mechanism whereby the Refundable Dividend Tax On Hand (RDTOH) is applied to income earned from passive investments held in private corporation.

The income earned by the Corporation such as interest, rents, royalties, capital gains and dividends from foreign investments that are called passive investment income and are subject to higher tax rate than active business income. A portion of that higher tax is refunded by the Federal Government to the corporation when it distributes taxable dividends to its shareholders. Such passive investment income are subjected to higher tax rate up-front to reduce the incentive of retaining this income in a private corporation.

There are generally three components to the RDTOH account in a corporation. The first arises from “Part 1 refundable tax,” the second is the additional refundable tax on investment and the third from dividends received from other corporations also known as Part IV tax.


Related Solutions

Which of the following is an accurate description of tRNA?
Which of the following is an accurate description of tRNA?1-The type of RNA that is translated to produce a peptide or protein.2-The type of RNA that interacts with mRNA and has an amino acid covalently attached.3-None of the other choices is correct.4-The type of RNA that forms part of the protein-synthesizing machinery (i.e. the ribosome) of the cell.5-   The type of RNA that silences gene expression.
Which of the following is an accurate description of equity of redemption? a. A buyer in...
Which of the following is an accurate description of equity of redemption? a. A buyer in default purchases their property after a foreclosure sale for the full amount of the original purchase price. b. A seller demands that a buyer in default pay the full amount of outstanding debt on a mortgaged property. c. A buyer in default pays the full amount of outstanding debt on a mortgaged property, plus interest and other associated costs, after the foreclosure sale. d....
Which of the following statements is the most accurate description of limited liability? A. In a...
Which of the following statements is the most accurate description of limited liability? A. In a company limited by shares, shareholder who holds a share in the company is not liable beyond any amount outstanding on partly paid shares. B. In a company limited by shares, a company has limited liability for their debts. C. A company is a separate legal entity from its directors, so directors are always shielded from the company's losses. D. A and B above. E....
Which of the following is an accurate description of statutory redemption? a. A seller demands that...
Which of the following is an accurate description of statutory redemption? a. A seller demands that a buyer in default pay the full amount of outstanding debt on a mortgaged property. b. A buyer in default pays the full amount of outstanding debt on a mortgaged property, plus interest and the other associated costs, after the foreclosure sale. c. A buyer in default purchases their property after a foreclosure sale for the full amount of the original purchase price only....
Which of the following is NOT an accurate description for epithelial cells? a. interconnected c. held...
Which of the following is NOT an accurate description for epithelial cells? a. interconnected c. held together by tight junctions b. symmetrical d. glycoprotein-covered Lipopolysaccharides, flagellin, and double-stranded DNA are microbe-associated molecular patterns recognized by a. tight junctions. c. tumor necrosis factors. b. ribosomes. d. pattern recognition receptors. Which of the following statements is true? a. Type I and type II interferons have the same effect on the body. b. Interferon-alpha promotes phagocytosis. c. Type II interferons increase MHC antigens...
Which of the following is the most accurate description of an organism’s direct fitness? A. Its...
Which of the following is the most accurate description of an organism’s direct fitness? A. Its reproductive success measured by number of their offspring that also reproduce. B. The sum of the organism’s strength and stamina. C. The ability of the organism to survive in the face of predators, disease, parasites, and competition. D. How well an organism blends into its environment to escape detection. E. None of the above is related to direct fitness. Which of the following is...
QUESTION 14 Which of the following statements is the most accurate description of limited liability? A....
QUESTION 14 Which of the following statements is the most accurate description of limited liability? A. In a company limited by shares, shareholder who holds a share in the company is not liable beyond any amount outstanding on partly paid shares. B. In a company limited by shares, a company has limited liability for their debts. C. A company is a separate legal entity from its directors, so directors are always shielded from the company's losses. D. A and B...
which is not an accurate description of the relationship among chordatas? a) all possess a "chord"...
which is not an accurate description of the relationship among chordatas? a) all possess a "chord" i.e. a backbone b) all vertebrates are chordatas but not all chordatas are vertebrates c) within the phylum that contains humans, there exist closely related invertebrate species d) an endoskeleton has allowed vertebrates to become much larger (and more successful) than non-vertebrates
31) Which of the following provide the best description of totipotent stem cetlis? a. They are...
31) Which of the following provide the best description of totipotent stem cetlis? a. They are converted from differentiated cells through the stimulation of some transcription factors. b. They are present in adult brain to produce new nerve cells to facilitate learning and memory. c. They can produce both blood and immune cells. d. They are embryonic stem cells capable of generating every type of cells in the body. 32) Which of the following experimental results did does NOT contribute...
Which of the following statements is the least accurate?
Which of the following statements is the least accurate?a.Common types of contingent claim derivatives include options and modified versions of swaps, forward contracts and futures contracts.b.An option that gives the right to buy is referred to as a put; an option that gives the right to sell is referred to as a call.c.Asset-backed securities are examples of contingent claims.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT