ch16so - Chapter 16 International Taxation in Canada...

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Chapter 16 International Taxation in Canada Questions 16-1 The purpose of the deemed disposition/acquisition rule is to provide a tax  cost base from which future income/gains are determined for Canadian  income tax purposes. 16-2 No, public company shares are not taxable Canadian property unless the  shareholder holds 25% or more of the issued share capital. 16-3 While the Canadian  Income Tax Act  imposes a 25% withholding tax rate,  this rate may be overridden by a tax treaty. For example, the withholding tax  on interest under the Canada-U.S. Tax Convention is 10%. 16-4 Non-residents who are filing a Canadian income tax return for employment  income,   business   income,   or   because   they   have   disposed   of   taxable  Canadian   property,   are   entitled   to   claim   the   same   personal   tax   credits  available to a resident where their Canadian-source income represents 90%  or more of their world income. Multiple Choice 16-1 B 16-2 A 183
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184 TAXATION   IN   CANADA 16-3 D 16-4 C 16-5 B
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INTERNATIONAL    TAXATION   IN   CANADA 185 Problems Problem 16-1 Alan is deemed to have disposed of the shares on emigration at their fair  market value of $40,000. Given his ACB of $28,000, he will have a capital  gain of $12,000, and a taxable capital gain of $6,000. Problem 16-2 Alan can elect to defer paying the tax that results from the deemed  disposition rule. The election must be made on or before the balance due  date for the year in which emigration takes place. If the election is made, the  payment of the tax can be deferred without interest until the properties are  actually sold. Since security is not required for up to $100,000 of capital  gains resulting from the deemed disposition rule, Alan will not be required  to post security with the CRA. Problem 16-3 Memorandum to Andrew England Re: Canadian tax position You   will   be   deemed   to   have   been   employed   in   Canada   under  subsection 115(2) and taxable on that income under Part I. Therefore, you  will need to file a Canadian income tax return to report your employment  income earned in Canada. You will be entitled to the personal tax credits for  CPP   and   EI.   You   are   not   entitled   to   personal   tax   credits   available   to  residents, such as the basic personal amount, since less than 90% of your  world income is from a Canadian source. Your employment income for Canadian tax purposes will consist of the  $35,000 salary from the Toronto Metros and the $25,000 signing bonus you  received. The $3,000 paid to your agent is not deductible for Canadian tax  purposes, as there is no provision for such a deduction in section 8 of the 
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ch16so - Chapter 16 International Taxation in Canada...

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