ACCT226 MCQ and Answer Chapter 7 #3 PDF

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ACCT226 MCQ and Answer Chapter 7 #3...

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1.

Shahrukh owns a residential rental building which he purchased for $200,000 in 2019. In that year, his rental income before CCA was $5,000. In 2020, his rental income before CCA was $8,000. Sharukh always minimizes his tax liability. Which of the following statements is correct?

A. Shahrukh has a net rental loss of $3,000 in 2019. B. Shahrukh has net rental income of $160 in 2020. C. Shahrukh has net rental income of nil in 2020. D. Shahrukh has net rental income of $200 in 2020.

2.

Which of the following statements with respect to dividends is NOT correct?

A. Capital dividends can be received by individuals without tax consequences. B. All taxable dividends paid by Canadian controlled private corporations are non-eligible dividends. C. Stock dividends are subject to the same gross up and tax credit procedures as cash dividends. D. Dividend tax credits are based on a percentage of the gross up on dividends received.

3.

During 2019 Thelma Evatt receives eligible dividends of $23,000. She has no other source of income in that year. What would be the amount of federal Tax Payable or refund on these dividends?

A. $4,761 B. $3,450 C. Nil D. A $6.00 Refund

4.

The federal dividend tax credit cannot be claimed if you receive:

A. Eligible dividends. B. Non-eligible dividends. C. Stock dividends. D. Capital dividends.

5.

Which of the following statements is correct?

A. The federal dividend tax credit is equal to 38 percent of the eligible dividends received. B. The federal dividend tax credit is equal to 6/11 of the gross up on eligible dividends received. C. The federal dividend tax credit is equal to 15 percent of the non-eligible dividends received. D. The federal dividend tax credit is equal to 6/11 of the gross up on non-eligible dividends received.

6.

Which of the following statements is correct?

A. Net Property Income = Dividends received plus the gross-up minus the dividend tax credit. B. Net Property Income = Dividends received minus the gross-up minus the dividend tax credit. C. Federal Tax Payable = Federal tax on grossed-up dividends minus the dividend tax credit. D. Federal Tax Payable = The gross up on dividends received minus the dividend tax credit.

7.

During 2019 Erin received eligible dividends of $800, non-eligible dividends of $600 and foreign dividends of $900 (10% foreign tax was withheld at source). Her 2019 net property income for tax purposes is:

A. $2,648. B. $2,694. C. $2,748. D. $2,794.

8.

During 2019 Rolf received eligible dividends of $900 and non-eligible dividends of $600. His 2019 federal dividend tax credit is:

A. $231 B. $249 C. $286 D. You can’t calculate the dividend tax credit if you don’t know his effective tax rate.

9.

Sherry’s marginal federal tax rate is 29 percent. She lives in a province where her provincial

marginal tax rate is 17.5 percent and the provincial dividend tax credit is 31 percent of the dividend gross up. If Sherry receives an eligible dividend of $16,000 from a Canadian public corporation in 2019, how much will she pay in income tax?

A. $6,150. B. $2,827. C. $5,066. D. $8,382.

10. Martin held 2 percent of the outstanding shares of a Canadian public corporation. The corporation issued an eligible stock dividend in 2019 and capitalized $800,000 of its retained earnings. By how much will Martin’s Taxable Income increase as a result of the dividend?

A. $ 8,000. B. $16,000. C. $18,400. D. $22,080.

1.

B.

2019: [(1/2)($200,000)(4%)] = $4,000, UCC = $200,000 - $4,000 = $196,000 2020: $196,000 x 4% = $7,840, Rental income = $8,000 - $7,840 = $160

2.

B. All taxable dividends paid by Canadian controlled private corporations are noneligible dividends.

3.

C.

4.

D.Capital Dividends. (Capital Dividends are non-taxable and do not generate a dividend tax credit.)

5.

B.The federal dividend tax credit is equal to 6/11 of the gross up on eligible dividends received.

6.

C. Federal Tax Payable = Federal tax on grossed-up dividends minus the dividend tax credit.

7.

D. $2,794 [($800)(138%) + ($600)(115%) + ($900 ÷ 90%)]

8.

28. B.

Nil [(138%)($23,000)(15%) - (38%)($23,000)(6/11)]

$249 [($900)(38%)(6/11) + ($600)(15%)(9/13)]

9.

C.

$5,066.

Taxes on the grossed up eligible dividends [(138%)($16,000)(29% + 17.5%)]

$10,267

Dividend tax credit [(38%)($16,000)(6/11 + 31%)]

( 5,201)

Net Taxes

$ 5,066

10.

10. D. $22,080 [(2%)($800,000)(138%)]....