Practice Quiz Covers Week 1 to 6 PDF

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Question 1Jerry collects baseball cards as a hobby. During the current year, he acquired twenty-five different items at a total cost of $29,550. During the year, he sold each of those items and received total proceeds of $55,900. What is the effect of these transactions on Jerry’s Net Income For Tax...

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Question 1 Jerry collects baseball cards as a hobby. During the current year, he acquired twenty-five different items at a total cost of $29,550. During the year, he sold each of those items and received total proceeds of $55,900. What is the effect of these transactions on Jerry’s Net Income For Tax Purposes? a. Jerry has ataxable capital gain of $26,350. b. Because the collection was a hobby, the gain does not have to be included in Net Income For Tax Purposes. c. Jerry has a taxable capital gain of $13,175. d. Jerry has business income of $26,350.

Question 2 Nigel buys an option for $1,000 which allows him to purchase a block of shares for $40,000. Which of the following statements is NOT correct? a. b. c. d.

If Nigel sells the option for $700, he has an allowable capital loss of $350. If Nigel allows the option to expire, he has an allowable capital loss of $500. If Nigel purchases the shares, the adjusted cost base of the shares will be $41,000. If Nigel allows the option to expire, the vendor has a taxable capital gain of $500.

Question 3 Equipment was stolen from Far East Corp. on May 1, 2020. The cost of the equipment was $10,000 and the UCC was $7,500. The insurance proceeds of $12,000 were received on September 15, 2020 and replacement equipment was purchased for $11,500 on September 30, 2020. Far East makes all elections to minimize the tax effect of replacing the equipment. Which of the following statement is correct? a. The 2020 taxable capital gain is $1,000 and the deemed capital cost of the new equipment is $12,000. b. The 2020 taxable capital gain is $250 and the deemed capital cost of the new equipment is $10,000. c. The 2020 taxable capital gain is $250 and the deemed capital cost of the new equipment is $11,500 d. The 2020 taxable capital gain is $250 and the deemed capital cost of the new equipment is $10,750 Question 4 Tabari has income from employment of $25,000 during the year. As well, he has a capital gain on Listed Personal Property of $8,000 on the sale of a stamp collection, and a capital gain from the sale of some shares of $6,000. Last year, he had a capital loss on Listed Personal Property of $10,000 that he was unable to use and carried forward to the current year. What is his net income for tax purposes for the year, assuming that this accounts for all of his income for the year?

a. b. c. d.

$28,000 $27,000 $32,000 $31,000

Question 5 Jean Brochet uses an automobile in his unincorporated business. It cost $53,000 in 2019, with maximum CCA being deducted in that year. The purchase was financed with a bank loan of $37,000. For 2020, the interest on this loan was $4,440. The automobile is used exclusively for business purposes, with the 2020 operating costs totaling $7,500. In determining his 2020 business income, his maximum automobile related deduction will be: a. $19,875 b. $16,100 c. $24,665 d. $16,890

Question 6 Jose Montana owns a cottage that he purchased in 2011 for $330,000, with $100,000 of this amount reflecting the value of the land. On January 1, 2020, thos cottage is converted to a rental property. At the time of conversion, it is estimated that the cottage has a fair market value of $600,000, with $150,000 of this amount reflecting the value of the land. For 2020, rental income, net of all expenses except CCA equals $30,200. What is the maximum amount of CCA that Jose can deduct on this rental property for 2020? a. $6,800 b. $9,000 c. $18,000 d. $27,000

Question 7 Old Time Company purchased a Class 10 truck many years ago for $8,000. The truck has now become a collector’s item and was sold on August 1, 2020 for $10,000. The net book value on that date was $500 and the Class 10 UCC balance was $11,525. There are other assets left in the class. Accounting net income before tax for the year ended December 31, 2020 was $24,000. Amortization of depreciable capital assets for accounting purposes is equal to the CCA deducted for tax purposes. Net income for tax purposes is: a. $26,000

b. $15,500 c. $25,000 d. $15,000

Question 8 With respect to an Allowable Business Investment Loss, which of the following statements is NOT correct? a. If not used during the current year, an Allowable Business Investment Loss can only be applied against taxable capital gains in a carry forward or carry back period. b. An Allowable Business Investment Loss results from the disposition of shares of a small business corporation. c. An Allowable Business Loss can be deducted against any source of income. d. An Allowable Business Investment Loss is the deductible portion of a Business Investment Loss.

Question 9 When property acquired for personal use is sold for more than its cost, there will be a taxable capital gain. True False

Question 10 Robert bought a rental property ten years ago for $320,000, with $80,000 of the purchase price allocated to the land. Over the ten years, he claimed CCA such that his UCC at the beginning of this year for the building was $196,000. Robert sold the property this year for $520,000, with $180,000 of the sale price allocated to the land. Which of the following statements is correct? a. b. c. d.

Robert has recapture of $144,000 Robert has a capital gain of $100,000 Robert has recapture of $124,000 Robert has recapture of $44,000

Question 11 (5 points) Saved A corporation sold a long-term investment in common shares with an adjusted cost base of $25,000, for $10,000 during the

current year. It also sold a parcel of land that is considered capital property with an adjusted cost base of $8,000, for $12,000. Its net allowable capital loss for the year is $11,000. Question 11 options: True False

Question 12 (2 points) Saved One of the reasons for the favourable tax treatment of capital gains is that the amounts received often have to be reinvested in the business in order to maintain its productive capacity. Question 12 options: True False

Question 13 (2 points) Saved A dining room suite that had been purchased for $700 was sold during the year. The proceeds of disposition totalled $900. The capital gain on the transaction is $200. Question 13 options: True False

Question 14 (2 points) Saved Jon Bogen operates a consulting business out of a dedicated space in his home. It is his principal place of business. With respect to the items that he can deduct, which of the following statements is correct? Question 14 options: Jon can only deduct a pro rata share of operating costs, utilities, and property taxes. Jon can only deduct a pro rata share of operating costs, utilities, property taxes, and mortgage interest.

Jon can deduct a pro rata share of operating costs, utilities, property taxes, mortgage interest and CCA. Jon can only deduct a pro rata share of operating costs and utilities.

Question 15 (2 points) Saved The separate class election for photocopiers should be used only if the assets are retained and used for long periods of time. Question 15 options: True False

Question 16 (8 points) Saved Mike sold the following assets during the current year: Sales Price

Cost

$2,500 600 900 1,300

$ 800 1,200 100 1,950

Painting Stamp collection Outboard motor Antique desk

Which one of the following amounts represents his taxable capital gain, net of allowable capital losses, for tax purposes during the current year? Question 16 options: $625. $650. $325. $750.

Question 17 (5 points) Saved In the current fiscal year, a corporation acquired a rental property from its sole shareholder. The building was

transferred at its fair market value of $125,000, but was not allocated to a separate Class 1. The shareholder originally paid $150,000 for it. The property was included in Class 1 (4%) on the shareholder's tax return. The shareholder has earned rental income on the property since its acquisition. The undepreciated capital cost of the building at the time of the transfer was $120,000. Which one of the following amounts represents the maximum allowable capital cost allowance that the corporation may claim for this building in the current fiscal year? Question 17 options: $5,000. $4,800. $2,400. $2,500.

Question 18 (8 points) Saved Susan Cousins purchased a house in Oshawa in March, 2018, for $250,000 (land; $80,000, building; $170,000). Even though Susan would be unable to reside in the house immediately, she felt it was a very good price and did not want to miss the opportunity to own this house. She rented out the house as of April, 2018. Her tenants will move out in December, 2019, and she will move into her house in January, 2020. The fair market value of the house at January 1, 2020 was $300,000 (land; $130,000, building; $170,000). The UCC of the house on this date is $163,000. Which of the following is correct? Question 18 options: Susan can elect to designate the house as her principal residence for the years 2018 and 2019 so there is no capital gain on the house. Susan must recognize a capital gain for tax purposes of $50,000 at January 1, 2020. Susan must recognize a capital gain for tax purposes of $25,000 at January 1, 2019. The capital cost of the house for CCA purposes at January 1, 2020 is $275,000.

None of the above.

Question 19 (8 points) Saved On November 25, 2019 Ervin sold 100 shares of Mighty Ltd., an eligible small business corporation, for $32 per share. He purchased the shares in 2018 for $28 per share. On December 15, 2019 he reinvested the proceeds by buying 80 shares of Mouse Ltd. for $40 per share. Mouse Ltd. is also an eligible small business corporation so he was able to use the ITA 44.1 election to defer the 2019 capital gains. Ervin sold all of the Mouse Ltd. shares on July 5, 2020 for $52 per share. His taxable capital gain for 2020 is: Question 19 options: $480. $680. $1,360. $960.

Question 20 (5 points) Saved Myrle Cocco owns a car that she uses both in her business and for personal use. The cost of the car was $28,000 and, on January 1, 2020, the UCC for the vehicle (it is the only asset in Class 10) was $11,662. During the year she drives the car a total of 42,000 kilometers of which 38,000 were related to her business activities. Her insurance for the year was $950 and her operating costs were $6,500. What is the amount of her maximum deduction for car costs during 2020? Question 20 options: $10,239. $10,949. $ 9,906. $17,292....