INTRODUCTION TO FEDERAL INCOME TAXATION IN
CANADA TEST BANK CH 1 TO 5) || 46TH EDITION
ROBSON • MESCALL • JOHNSTONE • LIN || UPDATED
QUESTION BANK WITH VERIFIED ANSWERS || A+ STUDY
COMPANION 2026/2027
X Ltd. is a corporation which has always been managed by the same Board of
Directors. The Board of Directors has always met where the directors reside.
Based on these facts, X Ltd. will NOT be resident in Canada for income tax
purposes if X Ltd. was:
a) Incorporated in Canada in 1968 and its directors are all U.S. residents.
b) Incorporated in the U.S. in 1970 and its directors are all U.S. residents.
c) Incorporated in the U.S. in 1968 and its directors are all Canadian residents.
d) Incorporated in Canada in 1964 and its directors are all Canadian residents. -
CORRECT ANSWER -b) Incorporated in the U.S. in 1970 and its directors
are all U.S. residents.
Since X Ltd. is not incorporated in Canada, it is not deemed to be resident in
Canada. Since the directors are not resident in Canada, X Ltd. is not resident in
Canada under the common law ''central management and control'' rule.
Joe is legally separated from his wife and has two adult children who live with
his wife and are not dependent on him for support. Joe is leaving Canada to take
a job in Germany on June 30 of this year. He plans to stay in Germany
indefinitely and has purchased a home there. Which one of the following things
is the most important for Joe to do to help ensure that he is not a resident of
Canada for Canadian income tax purposes after he leaves?
a) Take his wife and children with him to Germany.
b) Give up his Canadian citizenship.
c) Sell his Canadian home or rent it under a long-term lease.
d) Put all his household furniture and personal effects into storage in Canada. -
CORRECT ANSWER -c) Sell his Canadian home or rent it under a long-
term lease.
,Generally, the CRA will consider the individual not to have severed residential
ties within Canada if he has a dwelling available for occupancy.
Jay ceased to be a resident of Canada on April 30 of the year and moved to New
Zealand on that date. During the first four months of the year, he earned
$25,000 of employment income in Canada and $1,000 of interest income from
his bank accounts in Canada. While living in New Zealand during the remainder
of the year, he earned $30,000 (Cdn. $) of employment income in New Zealand
and received $2,000 of interest income from his Canadian bank accounts.
What amount of taxable income must Jay report on his Canadian personal
income tax return for the year?
a) $58,000
b) $56,000
c) $26,000
d) Nil - CORRECT ANSWER -c) $26,000
Because Jay ceased to be a resident of Canada on April 30 of the year, only his
worldwide income during the first four months of the year ($26,000 = $25,000
+ $1,000) is subject to tax in Canada under Part I and would be reported on his
Canadian personal income tax return for the year.
Mr. A was born in Canada and has lived in Canada all of his life. On November
1st of the current year, he was transferred by his employer to Brussels, Belgium.
There is no plan for him to return to Canada in the foreseeable future. He is not
married and has no children. For the current year, Mr. A's Canadian residence
status for tax purposes is most accurately described as:
a) Non-resident
b) Resident by virtue of common law
c) Deemed resident
d) Part-time resident - CORRECT ANSWER -d) Part-time resident
Mr. A is ceasing residency on November 1st therefore we have a situation
where the residency status is changing in the year. Mr. A would be a resident
, for the January 1 to November 1 period and a non-resident in the later part of
the year. He would be a part-year resident in the current year.
Mrs. Bee was born in Florence, Italy. She was married for several years to Mr.
Cee and resided with him in the family home in Waterloo, Ontario, Canada.
Three years ago, Mrs. Bee and Mr. Cee were divorced and she moved back to
Florence at that time, where she continues to reside and own a home. During the
current year, Mrs. Bee spent the full months of February through April and the
full months of August through November in Canada, assisting a friend of hers
who was ill. She resided at the friend's home during her time in Canada. Mrs.
Bee's Canadian residence status for tax purposes, under the provisions of the
Income Tax Act, for the current year is most accurately described as:
a) Non-resident
b) Resident by virtue of common law
c) Deemed resident
d) Part-time resident - CORRECT ANSWER -c) Deemed resident
Mrs. Bee lives in Florence therefore would be a non-resident were it not for the
sojourner rule. Since she spent a significant amount of time in Canada during
the year (more than 179 days), she would be a deemed resident and would be
taxed on her worldwide income.
Miss Dey is employed by an engineering consulting firm, with its head office in
Mississauga, Ontario, Canada. She rents an apartment near her employer's
office. She is single and has no children. During the current year, Miss Dey's
employer asked her to take on a project for the company in Alaska, USA. She
moved to Alaska on February 1st. She is uncertain when she will be moving
back to Mississauga, but it will be some time prior to the end of next year. She
is maintaining her apartment and has sublet it to a friend. Miss Dey's Canadian
residence status for tax purposes, under the provisions of the Income Tax Act,
for the current year is most accurately described as:
a) Non-resident
b) Resident by virtue of common law
c) Deemed resident
CANADA TEST BANK CH 1 TO 5) || 46TH EDITION
ROBSON • MESCALL • JOHNSTONE • LIN || UPDATED
QUESTION BANK WITH VERIFIED ANSWERS || A+ STUDY
COMPANION 2026/2027
X Ltd. is a corporation which has always been managed by the same Board of
Directors. The Board of Directors has always met where the directors reside.
Based on these facts, X Ltd. will NOT be resident in Canada for income tax
purposes if X Ltd. was:
a) Incorporated in Canada in 1968 and its directors are all U.S. residents.
b) Incorporated in the U.S. in 1970 and its directors are all U.S. residents.
c) Incorporated in the U.S. in 1968 and its directors are all Canadian residents.
d) Incorporated in Canada in 1964 and its directors are all Canadian residents. -
CORRECT ANSWER -b) Incorporated in the U.S. in 1970 and its directors
are all U.S. residents.
Since X Ltd. is not incorporated in Canada, it is not deemed to be resident in
Canada. Since the directors are not resident in Canada, X Ltd. is not resident in
Canada under the common law ''central management and control'' rule.
Joe is legally separated from his wife and has two adult children who live with
his wife and are not dependent on him for support. Joe is leaving Canada to take
a job in Germany on June 30 of this year. He plans to stay in Germany
indefinitely and has purchased a home there. Which one of the following things
is the most important for Joe to do to help ensure that he is not a resident of
Canada for Canadian income tax purposes after he leaves?
a) Take his wife and children with him to Germany.
b) Give up his Canadian citizenship.
c) Sell his Canadian home or rent it under a long-term lease.
d) Put all his household furniture and personal effects into storage in Canada. -
CORRECT ANSWER -c) Sell his Canadian home or rent it under a long-
term lease.
,Generally, the CRA will consider the individual not to have severed residential
ties within Canada if he has a dwelling available for occupancy.
Jay ceased to be a resident of Canada on April 30 of the year and moved to New
Zealand on that date. During the first four months of the year, he earned
$25,000 of employment income in Canada and $1,000 of interest income from
his bank accounts in Canada. While living in New Zealand during the remainder
of the year, he earned $30,000 (Cdn. $) of employment income in New Zealand
and received $2,000 of interest income from his Canadian bank accounts.
What amount of taxable income must Jay report on his Canadian personal
income tax return for the year?
a) $58,000
b) $56,000
c) $26,000
d) Nil - CORRECT ANSWER -c) $26,000
Because Jay ceased to be a resident of Canada on April 30 of the year, only his
worldwide income during the first four months of the year ($26,000 = $25,000
+ $1,000) is subject to tax in Canada under Part I and would be reported on his
Canadian personal income tax return for the year.
Mr. A was born in Canada and has lived in Canada all of his life. On November
1st of the current year, he was transferred by his employer to Brussels, Belgium.
There is no plan for him to return to Canada in the foreseeable future. He is not
married and has no children. For the current year, Mr. A's Canadian residence
status for tax purposes is most accurately described as:
a) Non-resident
b) Resident by virtue of common law
c) Deemed resident
d) Part-time resident - CORRECT ANSWER -d) Part-time resident
Mr. A is ceasing residency on November 1st therefore we have a situation
where the residency status is changing in the year. Mr. A would be a resident
, for the January 1 to November 1 period and a non-resident in the later part of
the year. He would be a part-year resident in the current year.
Mrs. Bee was born in Florence, Italy. She was married for several years to Mr.
Cee and resided with him in the family home in Waterloo, Ontario, Canada.
Three years ago, Mrs. Bee and Mr. Cee were divorced and she moved back to
Florence at that time, where she continues to reside and own a home. During the
current year, Mrs. Bee spent the full months of February through April and the
full months of August through November in Canada, assisting a friend of hers
who was ill. She resided at the friend's home during her time in Canada. Mrs.
Bee's Canadian residence status for tax purposes, under the provisions of the
Income Tax Act, for the current year is most accurately described as:
a) Non-resident
b) Resident by virtue of common law
c) Deemed resident
d) Part-time resident - CORRECT ANSWER -c) Deemed resident
Mrs. Bee lives in Florence therefore would be a non-resident were it not for the
sojourner rule. Since she spent a significant amount of time in Canada during
the year (more than 179 days), she would be a deemed resident and would be
taxed on her worldwide income.
Miss Dey is employed by an engineering consulting firm, with its head office in
Mississauga, Ontario, Canada. She rents an apartment near her employer's
office. She is single and has no children. During the current year, Miss Dey's
employer asked her to take on a project for the company in Alaska, USA. She
moved to Alaska on February 1st. She is uncertain when she will be moving
back to Mississauga, but it will be some time prior to the end of next year. She
is maintaining her apartment and has sublet it to a friend. Miss Dey's Canadian
residence status for tax purposes, under the provisions of the Income Tax Act,
for the current year is most accurately described as:
a) Non-resident
b) Resident by virtue of common law
c) Deemed resident
