1. Award:j
WhichjofjthejfollowingjisjnotjconsideredjtojbejajseparatejentityjforjtaxjpurposesjinjCanada?
j Anjindividual
j j Ajproprietorshipj
j Ajcorporationj
j Ajtrust
AjproprietorshipjisjcorrectjasjthejentitiesjsubjectjtojtaxjonjincomejinjCanadajarejindividuals,jcorporations,jandjtrusts.
2. Award:j
Whichjofjthejfollowingjattitudesjandjactionsjisjmostjlikelyjtojhelpjdecision-makersjdevelopjanjefficientjapproachjtojtaxation?
j Cashjflowsjshouldjbejconsideredjfromjajbefore-taxjperspectivejwhenjmakingjdecisions.
j Functionaljmanagersjshouldjnotjbejheldjresponsiblejforjthejtaxjeffectsjofjdecisionsjwithinjtheirjdivisions.
j Taxjcostsjtojajbusinessjshouldjbejregardedjasjcontrollablejexpenses,jmuchjlikejproductjcostsjandjsellingjcosts.
j
j AlljmanagersjshouldjownjajcopyjofjthejIncomejTaxjAct.
Taxationjshouldjbejconsideredjinjalljaspectsjofjbusinessjplanningjonjanjongoingjbasis.
3. Award:j
Whichjofjthejfollowingjstatementsjisjtrue?
j Dividendsjpaidjbyjajcorporationjarejdeductiblejbyjthatjcorporationjandjarejajformjofjpropertyjincomejforjthejrecipient.j
j Dividendsjpaidjbyjajcorporationjarejdeductiblejbyjthatjcorporationjandjarejajformjofjbusinessjincomejforjthejrecipient.
j Dividendsjpaidjbyjajcorporationjarejnotjdeductiblejbyjthatjcorporationjandjarejajformjofjbusinessjincomejforjthejrecipient.j j
j Dividendsjpaidjbyjajcorporationjarejnotjdeductiblejbyjthatjcorporationjandjarejajformjofjpropertyjincomejforjthejrecipient.
Dividendsjarejpaidjfromjafter-taxjcorporatejincomejandjarejnotjajdeductiblejexpense.jDividendsjreceivedjbyjindividualsjarejajformjofjpropertyjincome.
4. Award:j
Whenjassessingjthejvaluejofjajcorporation,jthejmostjrelevantjinformationjthatjdecision-makersjnormallyjconsiderjisj
j thejpotentialjforjbefore-taxjprofits.
j thejpotentialjforjafter-taxjprofits.j
j
j thejcurrentjcorporatejtaxjrate.j
j cashjflowjbefore-tax.
Decision-makingjshouldjalwaysjaddressjthejafter-taxjvalues.
,5. Award:j
Incomejtaxjisjcalculatedjforjwhichjofjthejfollowingjjurisdictionaljgroups?
j Municipal,jprovincial,jandjfederalj
j Municipal,jfederal,jandjforeign
j j Provincial,jfederal,jandjforeignj
j Municipal,jprovincial,jandjforeign
Canadianjtaxpayersjarejusuallyjsubjectjtojprovincial,jfederal,jandjforeignjtaxjonjinternationaljincome.
6. Award:j
Twojinvestorjcorporationsjmayjnotjenterjjointlyjintojwhichjofjthejfollowing?
j Jointjventurej
j Partnership
j Separatejcorporationj
j Proprietorship
j
Ajproprietorship,jsincejitjisjanjoperationjrunjbyjonejindividual.
7. Award:j
Whichjofjthejfollowingjstatementsjisjtrue?
j Cashjflowjshouldjneverjbejcalculatedjonjanjafter-taxjbasis.
j j Thejtaxjcostjtojajbusinessjshouldjbejregardedjasjajcostjofjdoingjbusiness.
j Incomejtaxjcannotjbejtreatedjasjajcontrollablejcost.
j Thejvaluejofjanjenterprisejshouldjbejbasedjonjpre-taxjcashjflow.
Taxjcostsjarejajregularjpartjofjdoingjbusinessjandjthereforejhavejanjimpactjonjcashjflow.
8. Award:j
Loganjholdsjaj7%jinterest-
bearingjdebtjinstrumentjinjGlowjCo.jGlowjCo.'sjtaxjratejisj27%,jandjLoganjisjinjaj45%jtaxjbracket.jWhichjofjthejfollowingjstatementsjisjcorrect?
j j Thejafter-taxjcostjofjthejdebtjinstrumentjisj5.11%jtojGlowjCo.,jandjthejafter-taxjvaluejtojLoganjisj3.85%.j
jThejafter-taxjcostjofjthejdebtjinstrumentjisj5.11%jtojGlowjCo.,jandjthejafter-taxjvaluejtojLoganjisj3.15%.j
jThejafter-taxjcostjofjthejdebtjinstrumentjisj1.89%jtojGlowjCo.,jandjthejafter-taxjvaluejtojLoganjisj3.15%.j
j Thejafter-taxjcostjofjthejdebtjinstrumentjisj7%jtojGlowjCo.,jandjthejafter-taxjvaluejtojLoganjisj7%.
.07j×j(1j-j.27)j=j5.11%
.07j×j(1j-j.45)j=j3.85%.
,9. Award:j
Whichjofjthejfollowingjlistsjaccuratelyjnamesjthejfivejgeneraljincomejcategoriesjforjtaxjpurposes?
j Business,jInterest,jEmployment,jCapitaljGains,jOtherj
j Business,jProperty,jEmployment,jCapitaljGains,jForeign
j j Business,jProperty,jEmployment,jCapitaljGains,jOtherj
j Business,jProperty,jEmployment,jInvestments,jOther
IncomejforjtaxjpurposesjisjcategorizedjasjBusiness,jProperty,jEmployment,jCapitaljGains,jandjOther.
10. Award:j
Proprietorships,jcorporations,jpartnerships,jlimitedjpartnerships,jjointjventures,jandjincomejtrustsjarejallj
j categoriesjofjincomejforjtaxjpurposes.
j taxjjurisdictions.
j examplesjofjfinancialjinstruments.j
j formsjofjbusiness.
j
Thisjlistjcomprisesjthejmanyjformsjofjbusinessesjthatjmayjbejcreated.
11. Award:j
WhichjofjthejfollowingjstatementsjregardingjtaxationjwithinjjurisdictionsjinjCanadajisjtrue?j
j Federaljandjprovincialjorjterritorialjtaxjbracketsjarejalwaysjidenticaljtojonejanother.
j Onlyjfederaljtaxesjapplyjtojindividualsjwhilejbothjfederaljandjprovincialjorjterritorialjtaxesjapplyjtojcorporations.
j BothjfederaljandjprovincialjorjterritorialjtaxesjapplyjtojCanadianjtaxpayers.
j
j Onlyjfederaljtaxesjapplyjtojcorporationsjwhilejbothjfederaljandjprovincialjtaxesjapplyjtojindividuals.
Canadianjtaxpayersjarejsubjectjtojbothjfederaljandjprovincialjorjterritorialjtaxes,jandjthejschedulejofjratesjforjthejlatterjdiffersjperjjurisdiction.
12. Award:j
JamiejisjanjemployeejatjABCjLtd.jandjisjinjaj45%jtaxjbracket.jABCjLtd.jhasjajtaxjratejofj27%.jThejcompanyjhasjofferedjJamiejaj10%jpayjraise.jJamie'sjcurrentjsala
ryjisj$50,000.jWhatjisjafter-taxjcostjofjthejraisejtojABCjLtd.?
j$1,350j
j$2,750j
j $2,858
j $3,650
j
After-taxjcostjtojABCjLtd.:j($50,000j×j10%)j×j(1j-j.27)j=j$3,650.
, 13. Award:j
SimonejisjanjemployeejatjXYZjLtd.jandjisjinjaj45%jtaxjbracket.jXYZjLtd.jhasjajtaxjratejofj27%.jThejcompanyjhasjofferedjSimonejaj10%jpayjraise.jSimone'sjcurrentj
salaryjisj$50,000.jWhatjisjafter-taxjvaluejofjthejraisejtojSimone?
j $1,350j
j j $2,750j
j $2,858
j $3,650
After-taxjvaluejforjSimone:j($50,000j×j10%)j×j(1j-j.45)j=j$2,750.
14. Award:j
Alljcashjflowjmustjbejconsideredjonjanjafter-taxjbasisjbecausej
j companiesjwantjajpositivejcashjflow.
j thejvaluejtojajbusinessjmustjbejconsidered.j
j thejinvestor'sjtaxjratejisjirrelevant.
j j decisionsjthatjappearjfavourablejonjajpre-taxjbasisjmayjbejunfavorablejorjmarginallyjfavourablejonjanjafter-jtaxjbasis.
Taxesjmustjformjpartjofjthejcashjflowjdecision.
15. Award:j
Whichjofjthejfollowingjisjnotjajseparatejentityjforjtaxjpurposes?
j Corporationj
j Trust
j j Partnershipj
j Individual
Thejindividualjpartnerjisjtaxedjonjtheirjsharejofjthejpartnershipjincome.
16. Award:j
ThejCanadianjincomejtaxjsystemjisjconsideredj
j j progressive.
j regressive.j
j flat.
j unfair.
ThejCanadianjincomejtaxjsystemjisjconsideredjprogressivejbecausejthejratejofjtaxjonjmarginaljincomejgetsjprogressivelyjhigher.
WhichjofjthejfollowingjisjnotjconsideredjtojbejajseparatejentityjforjtaxjpurposesjinjCanada?
j Anjindividual
j j Ajproprietorshipj
j Ajcorporationj
j Ajtrust
AjproprietorshipjisjcorrectjasjthejentitiesjsubjectjtojtaxjonjincomejinjCanadajarejindividuals,jcorporations,jandjtrusts.
2. Award:j
Whichjofjthejfollowingjattitudesjandjactionsjisjmostjlikelyjtojhelpjdecision-makersjdevelopjanjefficientjapproachjtojtaxation?
j Cashjflowsjshouldjbejconsideredjfromjajbefore-taxjperspectivejwhenjmakingjdecisions.
j Functionaljmanagersjshouldjnotjbejheldjresponsiblejforjthejtaxjeffectsjofjdecisionsjwithinjtheirjdivisions.
j Taxjcostsjtojajbusinessjshouldjbejregardedjasjcontrollablejexpenses,jmuchjlikejproductjcostsjandjsellingjcosts.
j
j AlljmanagersjshouldjownjajcopyjofjthejIncomejTaxjAct.
Taxationjshouldjbejconsideredjinjalljaspectsjofjbusinessjplanningjonjanjongoingjbasis.
3. Award:j
Whichjofjthejfollowingjstatementsjisjtrue?
j Dividendsjpaidjbyjajcorporationjarejdeductiblejbyjthatjcorporationjandjarejajformjofjpropertyjincomejforjthejrecipient.j
j Dividendsjpaidjbyjajcorporationjarejdeductiblejbyjthatjcorporationjandjarejajformjofjbusinessjincomejforjthejrecipient.
j Dividendsjpaidjbyjajcorporationjarejnotjdeductiblejbyjthatjcorporationjandjarejajformjofjbusinessjincomejforjthejrecipient.j j
j Dividendsjpaidjbyjajcorporationjarejnotjdeductiblejbyjthatjcorporationjandjarejajformjofjpropertyjincomejforjthejrecipient.
Dividendsjarejpaidjfromjafter-taxjcorporatejincomejandjarejnotjajdeductiblejexpense.jDividendsjreceivedjbyjindividualsjarejajformjofjpropertyjincome.
4. Award:j
Whenjassessingjthejvaluejofjajcorporation,jthejmostjrelevantjinformationjthatjdecision-makersjnormallyjconsiderjisj
j thejpotentialjforjbefore-taxjprofits.
j thejpotentialjforjafter-taxjprofits.j
j
j thejcurrentjcorporatejtaxjrate.j
j cashjflowjbefore-tax.
Decision-makingjshouldjalwaysjaddressjthejafter-taxjvalues.
,5. Award:j
Incomejtaxjisjcalculatedjforjwhichjofjthejfollowingjjurisdictionaljgroups?
j Municipal,jprovincial,jandjfederalj
j Municipal,jfederal,jandjforeign
j j Provincial,jfederal,jandjforeignj
j Municipal,jprovincial,jandjforeign
Canadianjtaxpayersjarejusuallyjsubjectjtojprovincial,jfederal,jandjforeignjtaxjonjinternationaljincome.
6. Award:j
Twojinvestorjcorporationsjmayjnotjenterjjointlyjintojwhichjofjthejfollowing?
j Jointjventurej
j Partnership
j Separatejcorporationj
j Proprietorship
j
Ajproprietorship,jsincejitjisjanjoperationjrunjbyjonejindividual.
7. Award:j
Whichjofjthejfollowingjstatementsjisjtrue?
j Cashjflowjshouldjneverjbejcalculatedjonjanjafter-taxjbasis.
j j Thejtaxjcostjtojajbusinessjshouldjbejregardedjasjajcostjofjdoingjbusiness.
j Incomejtaxjcannotjbejtreatedjasjajcontrollablejcost.
j Thejvaluejofjanjenterprisejshouldjbejbasedjonjpre-taxjcashjflow.
Taxjcostsjarejajregularjpartjofjdoingjbusinessjandjthereforejhavejanjimpactjonjcashjflow.
8. Award:j
Loganjholdsjaj7%jinterest-
bearingjdebtjinstrumentjinjGlowjCo.jGlowjCo.'sjtaxjratejisj27%,jandjLoganjisjinjaj45%jtaxjbracket.jWhichjofjthejfollowingjstatementsjisjcorrect?
j j Thejafter-taxjcostjofjthejdebtjinstrumentjisj5.11%jtojGlowjCo.,jandjthejafter-taxjvaluejtojLoganjisj3.85%.j
jThejafter-taxjcostjofjthejdebtjinstrumentjisj5.11%jtojGlowjCo.,jandjthejafter-taxjvaluejtojLoganjisj3.15%.j
jThejafter-taxjcostjofjthejdebtjinstrumentjisj1.89%jtojGlowjCo.,jandjthejafter-taxjvaluejtojLoganjisj3.15%.j
j Thejafter-taxjcostjofjthejdebtjinstrumentjisj7%jtojGlowjCo.,jandjthejafter-taxjvaluejtojLoganjisj7%.
.07j×j(1j-j.27)j=j5.11%
.07j×j(1j-j.45)j=j3.85%.
,9. Award:j
Whichjofjthejfollowingjlistsjaccuratelyjnamesjthejfivejgeneraljincomejcategoriesjforjtaxjpurposes?
j Business,jInterest,jEmployment,jCapitaljGains,jOtherj
j Business,jProperty,jEmployment,jCapitaljGains,jForeign
j j Business,jProperty,jEmployment,jCapitaljGains,jOtherj
j Business,jProperty,jEmployment,jInvestments,jOther
IncomejforjtaxjpurposesjisjcategorizedjasjBusiness,jProperty,jEmployment,jCapitaljGains,jandjOther.
10. Award:j
Proprietorships,jcorporations,jpartnerships,jlimitedjpartnerships,jjointjventures,jandjincomejtrustsjarejallj
j categoriesjofjincomejforjtaxjpurposes.
j taxjjurisdictions.
j examplesjofjfinancialjinstruments.j
j formsjofjbusiness.
j
Thisjlistjcomprisesjthejmanyjformsjofjbusinessesjthatjmayjbejcreated.
11. Award:j
WhichjofjthejfollowingjstatementsjregardingjtaxationjwithinjjurisdictionsjinjCanadajisjtrue?j
j Federaljandjprovincialjorjterritorialjtaxjbracketsjarejalwaysjidenticaljtojonejanother.
j Onlyjfederaljtaxesjapplyjtojindividualsjwhilejbothjfederaljandjprovincialjorjterritorialjtaxesjapplyjtojcorporations.
j BothjfederaljandjprovincialjorjterritorialjtaxesjapplyjtojCanadianjtaxpayers.
j
j Onlyjfederaljtaxesjapplyjtojcorporationsjwhilejbothjfederaljandjprovincialjtaxesjapplyjtojindividuals.
Canadianjtaxpayersjarejsubjectjtojbothjfederaljandjprovincialjorjterritorialjtaxes,jandjthejschedulejofjratesjforjthejlatterjdiffersjperjjurisdiction.
12. Award:j
JamiejisjanjemployeejatjABCjLtd.jandjisjinjaj45%jtaxjbracket.jABCjLtd.jhasjajtaxjratejofj27%.jThejcompanyjhasjofferedjJamiejaj10%jpayjraise.jJamie'sjcurrentjsala
ryjisj$50,000.jWhatjisjafter-taxjcostjofjthejraisejtojABCjLtd.?
j$1,350j
j$2,750j
j $2,858
j $3,650
j
After-taxjcostjtojABCjLtd.:j($50,000j×j10%)j×j(1j-j.27)j=j$3,650.
, 13. Award:j
SimonejisjanjemployeejatjXYZjLtd.jandjisjinjaj45%jtaxjbracket.jXYZjLtd.jhasjajtaxjratejofj27%.jThejcompanyjhasjofferedjSimonejaj10%jpayjraise.jSimone'sjcurrentj
salaryjisj$50,000.jWhatjisjafter-taxjvaluejofjthejraisejtojSimone?
j $1,350j
j j $2,750j
j $2,858
j $3,650
After-taxjvaluejforjSimone:j($50,000j×j10%)j×j(1j-j.45)j=j$2,750.
14. Award:j
Alljcashjflowjmustjbejconsideredjonjanjafter-taxjbasisjbecausej
j companiesjwantjajpositivejcashjflow.
j thejvaluejtojajbusinessjmustjbejconsidered.j
j thejinvestor'sjtaxjratejisjirrelevant.
j j decisionsjthatjappearjfavourablejonjajpre-taxjbasisjmayjbejunfavorablejorjmarginallyjfavourablejonjanjafter-jtaxjbasis.
Taxesjmustjformjpartjofjthejcashjflowjdecision.
15. Award:j
Whichjofjthejfollowingjisjnotjajseparatejentityjforjtaxjpurposes?
j Corporationj
j Trust
j j Partnershipj
j Individual
Thejindividualjpartnerjisjtaxedjonjtheirjsharejofjthejpartnershipjincome.
16. Award:j
ThejCanadianjincomejtaxjsystemjisjconsideredj
j j progressive.
j regressive.j
j flat.
j unfair.
ThejCanadianjincomejtaxjsystemjisjconsideredjprogressivejbecausejthejratejofjtaxjonjmarginaljincomejgetsjprogressivelyjhigher.
