Tax - Ch3 Solutions


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CHAPTER 3 LIABILITY FOR TAX, INCOME DETERMINATION, AND ADMINISTRATION OF THE INCOME TAX SYSTEM Solutions to Key Concept Questions KC 3-1 [ITA: 250(1), (4) – Residence] a) Paula is a part-year resident. She is resident in Canada from January 1 to November 1 and non-resident for the remainder of the year. b) Al is resident in Canada. Although he is out of the country on a temporary work assignment for the current year, his residential ties remain in Canada. c) Kimberley is deemed to have been resident in Canada throughout the current taxation year. Although she is not ordinarily resident in Canada, she sojourned (temporary stay) in Canada for more than 182 days, in total, in the current year [ITA 250(1)(a)]. d) 102864 Limited is resident in Canada. Any company incorporated in Canada after April 26, 1965 is deemed resident in Canada [ITA 250(4)(a)]. e) Navy Ltd. is a non-resident corporation. KC 3-2 [ITA: 2(3) – Tax payable by non-residents] A non-resident must report three sources of income on a Canadian tax return: employment income earned in Canada, business income from carrying on business in Canada, and gains on the disposal of taxable Canadian property [ITA 2(3)]. In this case, Bill must report on a Canadian tax return his $15,000 of employment earned in Canada. KC 3-4 [Income categories] 1. Property income 8. Employment income 2. Other income 9. Property income 3. Business income 10. Business income 4. Capital gain 11. Capital gain 5. Employment income 12. Capital gain 6. Business income 13. Business income 7. Property income
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KC 3-5 [ITA: 3 – Net income] Taxpayer A Taxpayer B Taxpayer C 3(a) Employment Income $30,000 Business income Property income Other income (pension) $40,000 . 40,000 30,000 3(b) Taxable capital gains $25,000 0 Allowable capital losses (0) (3,000) Excess 25,000 0 40,000 25,000 $30,000 3(c) Other deductions 0 0 0 40,000 25,000 30,000 3(d) Business loss (20,000) Property loss (1,000) (0) (1,000) (20,000) Net Income $39,000 $ 5,000 $30,000 KC 3-6 [ITA: 3 – Net income] 3(a) Employment income
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This note was uploaded on 12/28/2011 for the course TAX 101 taught by Professor Mcgregor during the Fall '07 term at Wisc La Crosse.

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