This Is Solution to Chapter Problems and Key Concept Questions
Buckwold and Kitunen, Canadian Income Taxation, 2010-2011 Ed.
CHAPTER 10
INDIVIDUALS: DETERMINATION OF TAXABLE INCOME
AND TAXES PAYABLE
Review Questions
1.
Briefly explain the difference, for individuals, between net income for tax purposes and taxable income.
2.
Explain the difference between an allowable capital loss and a net capital loss.
3.
Describe the tax treatment of net capital losses.
4.
Explain how a non-capital loss is created and how it is treated for tax purposes.
5.
Is it always worthwhile to utilize a net capital loss or a non-capital loss as soon as the opportunity arises? Explain.
6.
Is it possible for taxpayers to pay tax on more income than they actually earned over a period of years? Explain.
7.
How does the risk of not being able to utilize a business loss for tax purposes vary for each of the following individuals?
• Individual A operates the business as a proprietorship.
• Individual B is the sole shareholder of a corporation that owns the business.
• Individual C is a 30% shareholder of a corporation that operates the business.
• Individual D is a 30% partner in a business partnership.
8.
What can a taxpayer do to reduce the risk of not being able to utilize a net capital loss or a non-capital loss?
9.
Two separate taxpayers are considering investing in shares of the same public corporation.
How is it possible that the risk associated with that investment may be greater for one taxpayer than for the other?
10.
If an individual has a net taxable capital gain in a year that qualifies for a capital gain deduction, is there any advantage to not claiming the applicable portion of the deduction in that year? Explain.
11.
If an individual is considering selling his business to a daughter, does it make any difference to him whether that business is a proprietorship or is housed within a corporation?
12.
What is the difference between the basic federal tax and
CHAPTER 10
INDIVIDUALS: DETERMINATION OF TAXABLE INCOME
AND TAXES PAYABLE
Review Questions
1.
Briefly explain the difference, for individuals, between net income for tax purposes and taxable income.
2.
Explain the difference between an allowable capital loss and a net capital loss.
3.
Describe the tax treatment of net capital losses.
4.
Explain how a non-capital loss is created and how it is treated for tax purposes.
5.
Is it always worthwhile to utilize a net capital loss or a non-capital loss as soon as the opportunity arises? Explain.
6.
Is it possible for taxpayers to pay tax on more income than they actually earned over a period of years? Explain.
7.
How does the risk of not being able to utilize a business loss for tax purposes vary for each of the following individuals?
• Individual A operates the business as a proprietorship.
• Individual B is the sole shareholder of a corporation that owns the business.
• Individual C is a 30% shareholder of a corporation that operates the business.
• Individual D is a 30% partner in a business partnership.
8.
What can a taxpayer do to reduce the risk of not being able to utilize a net capital loss or a non-capital loss?
9.
Two separate taxpayers are considering investing in shares of the same public corporation.
How is it possible that the risk associated with that investment may be greater for one taxpayer than for the other?
10.
If an individual has a net taxable capital gain in a year that qualifies for a capital gain deduction, is there any advantage to not claiming the applicable portion of the deduction in that year? Explain.
11.
If an individual is considering selling his business to a daughter, does it make any difference to him whether that business is a proprietorship or is housed within a corporation?
12.
What is the difference between the basic federal tax and