Canadian Tax Principles, 2024-2025 Edition, 1st edition Volume 1&2 Gary Donell ,Byrd , Chen Ebook PDF

Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 Get full Ebook on Email: tbworld2020@gmail.com Or on Website https:// academicresourceshub.com/ Whatsapp https://wa.me/16154344133 Byrd & Chen's Canadian Tax Principles Volume 1, Volume 2, and Study Guide 2024-2025 Edition © Gary Donell Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 GARY DONELL Byrd & Chen’s Canadian Tax: Principles 2024-2025 EDITION Volume I Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 ISBN 978-0-13-829700-8 Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 iii The textbook is published in two volumes: Chapter VOLUME 1 1 Introduction to Federal Taxation in Canada 2 Procedures and Administration 3 Income or Loss from an Office or Employment 4 Taxable Income and Tax Payable for Individuals Volume I = Chapters 1 to 10 Volume II = Chapters 11 to 21 Chapter VOLUME II Taxable Income and Tax Payable for Individuals Revisited 11 Appendix A: First Nations People: Tax Exemptions (ITA & ETA) Appendix B: Returns for Deceased Individuals 12 Capital Cost Allowance Taxable Income and Tax Payable for Corporations Taxation of Corporate Investment Income 5 Appendix: CCA Rates for Select Depreciable Property 13 6 Income or Loss from a Business 14 Other Issues in Corporate Taxation 7 Income or Loss from Property 15 Corporate Taxation and Management Decisions 16 Rollovers under Section 85 17 Other Corporate Rollovers and Sale of a Corporate Business 18 Partnerships 19 Trusts and Estate Planning 20 International Issues in Taxation 21 GST/HST 8 Capital Gains and Capital Losses 9 Other Income and Deductions, and Other Issues 10 Retirement Savings and Other Special Income Arrangements Detailed contents of Volume I, Chapters 1 to 10, follows. Glossary Appendix: ART and Foreign Tax Credit Calculations Located at the end of the Study Guide. Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 iv Table of Contents (Volume 1) CHAPTER 1 Self-Study Problems (SSPs)............................57 Assignment Problems......................................57 Introduction to Federal Taxation in Canada Learning Objectives...........................................1 CHAPTER 2 The Canadian Tax System................................. 2 Procedures and Administration Introduction.................................................................2 A Word on Basic Concepts........................................ 2 Alternative Tax Bases.................................................4 Taxable Entities in Canada........................................ 7 Federal Taxation and the Provinces/Territories . . .9 Tax Policy Concepts........................................ 11 Taxation and Economic Policy.................................11 Taxation and Income Levels.................................... 12 Tax Incidence........................................................... 15 Tax Expenditures......................................................15 Qualitative Characteristics of Tax Systems .... 16 Income Tax Reference Materials.....................18 Introduction...............................................................18 The Income Tax Act (ITA).........................................18 Other Income Tax Legislation.................................. 23 Other Sources of Income Tax Information .... 26 Liability for Part I Income Tax......................... 28 Residency Overview.................................................28 Part I Liability for Canadian Residents..................... 29 Part I Liability for Non-Residents..............................30 Residence..........................................................32 Importance and Overview........................................ 32 Factual Residence of Individuals............................. 33 Residence of Corporations.......................................42 Residence of Trusts................................................. 44 Alternative Concepts of Income......................45 The Economist’s View.............................................. 45 The Accountant's View............................................. 45 The Income Tax Act (ITA)—The Source Concept . 45 Net Income........................................................ 47 Structure and Components...................................... 47 ITA 3 Net Income—Example #1...............................49 ITA 3 Net Income—Example #2...............................50 ITA 3 Net Income—Example #3...............................50 ITA 3 Net Income—Comprehensive Example . . 51 Principles of Income Tax Planning.................53 Introduction...............................................................53 Tax Avoidance or Reduction.................................... 53 Tax Deferral..............................................................54 Income Splitting........................................................ 54 Abbreviations....................................................55 Learning Objectives......................................... 63 Introduction.......................................................64 Returns and Payments—Individuals .... 65 Requirement to File—ITA 150..................................65 Due Date for Individual Returns............................... 67 Income Tax Withholdings—ITA 153.........................69 Instalment Payments for Individuals— ITA 156..................................................................... 70 Interest......................................................................75 Penalties...................................................................77 Due Date for Balance Owing— Living Individuals......................................................78 Deceased Individuals—Balance Due Day and Final Return............................................... 78 Returns and Payments—Corporations ... 79 Due Date for Corporate Returns— ITA 150(1 )(a)........................................................... 79 Filing Alternatives for Corporations.......................... 79 Instalment Payments for Corporations— ITA 157..................................................................... 79 Balance Due Day—ITA 248(1)—Corporations. . . 81 Interest and Penalties for Corporations................... 82 Returns and Payments—Trusts...................... 82 Types of Trusts.........................................................82 Filing Due Date and Payment of Income Tax ... 83 General Requirement to File an Income Tax Return (T3)........................................................ 83 New Trust Reporting Requirements— ITA 150(1.1) to 150(1.4) and ITR 204.2................... 83 Bare Trusts and the CRA......................................... 84 Income Tax Information Returns.................... 85 Books and Records and the CRA................... 85 Assessments and the CRA My Account Service..................................... 86 CRA Website—My Account Service........................ 86 Notice of Assessment............................................. 87 Notice of Reassessment and Statutory Limitations................................................................ 87 Refunds-ITA 164(1)...........................................88 Interest on Refunds—ITA 164(3)............................. 89 Key Terms......................................................... 56 Adjustments to Income Tax Returns.............. 89 References........................................................ 57 Onus on Taxpayers.......................................... 90 (Continued) Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 Table of Contents (Volume 1) v Chapter 2 - Continued Inclusions—GST/HST & PST on Taxable Benefits.........................................138 Disputes and Appeals......................................91 Inclusions—Automobile Benefits................. 139 Representation by Others........................................91 Notice of Objection—ITA 165.................................. 91 Tax Court of Canada—ITA 169................................93 Federal Court and Supreme Court of Canada ... 95 Tax Evasion,Avoidance, and Planning. ... 95 Tax Evasion..............................................................95 Tax Avoidance and Planning....................................95 General Anti-Avoidance Rule (GAAR)— ITA 245 ................................................................... 96 The New General Anti-Avoidance Rule (GAAR) ITA 245 ..................................................... 97 Collection and Enforcement............................ 97 Collections................................................................ 97 Other Penalties.........................................................98 Taxpayer Relief Provisions............................102 Overview and Basic Rules..................................... 102 Voluntary Disclosure Program (VDP).....................103 Key Terms....................................................... 104 References...................................................... 104 Self-Study Problems...................................... 105 Assignment Problems.................................... 106 CHAPTER 3 Income or Loss from an Office or Employment Learning Objectives.......................................111 Introduction.....................................................112 Employees and Automobiles..................................139 Benefit When Motor Vehicles Are Not Automobiles.............................................. 141 Taxable Benefits—Standby Charge (ITA 6(2)).............................................................. 144 Operating Cost Benefit—Employer-Provided Automobile.............................................................146 Payments by Employees for Automobile Use. . 148 Example—Employer-Owned Automobile .... 148 Example—Employee-Owned or Employee-Leased Automobile.............................. 148 Example—Employer-Leased Automobile .... 149 Employer-Provided Automobiles and Income Tax Planning............................................ 150 Inclusions—Allowances............................... 151 Allowance vs. Reimbursement and Advances..........................................................151 General Rules.......................................................... 152 Taxable vs. Non-taxable Allowances and Reasonableness............................................... 153 Reasonable Allowances for Motor Vehicles. . . 153 Employer's Perspective of Allowances....................154 Employee's Perspective of Allowances...................155 Inclusions—Employee Life & Disability Insurance Benefits..................................... 155 Life Insurance.......................................................... 155 Disability Insurance—Group Sickness or Accident Insurance Plans.................................... 156 Loans to Employees.......................................157 General Rules..........................................................157 Income Tax Planning for Interest-Free Loans....................................................................... 160 Inclusions—Stock Option Benefits .... 161 Introduction.............................................................117 Employee Perspective........................................... 117 CPP Contributions and El Premiums..................... 118 Employer Perspective............................................121 Making the Distinction............................................ 123 Stock Option Deduction Rules (ITA 110(0.1 )& 110(1.1) to (1.9))......................... 161 The 2024 Federal Budget..................................... 162 Stock Option Benefits Rules (ITA 7)— Employees Only..................................................... 163 Overview of the Income Tax Rules........................ 163 CCPCs vs. Public Corporations............................. 165 Rules for Public Corporations................................ 166 Rules for Canadian Controlled Private Corporations (CCPCs)............................................167 Employee Stock Option Deduction Restriction (ITA 110(1.3) to (1.9)).......................... 169 Inclusions—Employee Benefits.................... 125 Other Inclusions............................................. 171 Employment Income Defined........................ 113 General Rules.........................................................113 Cash Basis and Planning....................................... 114 Employment Losses—ITA 5(2).............................. 116 Employee versus Self-Employed (Independent Contractor).......................... 117 Basic Concepts—ITA 6(1 )(a)................................ 125 Inclusions —Non-Salary Benefits................. 127 Introduction.............................................................127 Legislative Guidance.............................................. 128 Tax Planning Considerations..................................137 Payments by Employer to Employee— ITA 6(3).................................................................. 171 Forgiveness of Employee Loans—ITA 6(15). . . .171 Salary Advances.................................................... 171 Housing Loss Reimbursement— ITA 6(19) to (22)..................................................... 172 (Continued) Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 vi Table of Contents (Volume 1) Chapter 3 - Continued Specific Deductions —ITA 8..........................172 Overview................................................................ 172 Employment Expense Essentials ..........................175 Salesperson’s Expenses—ITA 8(1 )(f)................... 176 Travel Expensesand Motor Vehicle Expenses . .177 The Salesperson's Dilemma...................................177 Other Employment Expenses—ITA 8(1 Mi) . . . .178 Automobile and Aircraft Expenses— ITA 8(1 Mj)............................................................... 179 Work Space in the Home—ITA 8(1)(i)(iii), 8(1)(f), & 8(13)....................................................... .179 Determining the Employment Use of a Home Office........................................................... 181 Key Terms.......................................................181 References......................................................181 Self-Study Problems...................................... 182 Assignment Problems....................................182 CHAPTER 4 Taxable Income and Tax Payable for Individuals Learning Objectives....................................... 193 Introduction.....................................................194 Taxable Income of Individuals.......................195 Available Taxable Income Deductions................... 195 Ordering of Deductions...........................................195 Deductions for Payments—ITA 110(1 )(f) .... 195 Northern Residents Deductions—ITA 110.7 . . 196 Calculation of Gross Income Tax Payable . 196 Gross Federal Income Tax Payable.......................196 Provincial and Territorial Income Tax Payable before Credits...........................................197 Types of Income..................................................... 199 Income Tax on Income Not Earned in a Province or Territory ..............................................200 Federal Income Tax Credits...........................200 General Comments................................................ 200 Provincial and Territorial Amounts.........................201 Personal Tax Credits—ITA 118(1).................201 Basic Personal Amount (BPA)—ITA 118(1.1). . . .201 A Spouse or Common-Law Partner....................... 202 Individuals with a Spouse or CommonLaw Partner—ITA 118(1) (a)..................................203 Individuals Supporting a Dependent Person—ITA 118( 1 )(b)......................................... 205 Canada Caregiver Amount for Child— ITA 118(1 Mb. 1)................................................... 207 Single Persons (BPA)—ITA 118(1)(c).................. 208 Canada Caregiver Tax Credit—ITA 118(1)(d). . . 208 Other Tax Credits for Individuals....................211 Age Tax Credit—ITA 118(2).....................................211 Pension Income Tax Credit—ITA 118(3)................ 211 Canada Employment Tax Credit— ITA 118(10)........................................................... 212 Adoption Expenses Tax Credit— ITA 118.01.............................................................212 Digital News Subscriptions Credit— ITA 118.02.............................................................214 Home Accessibility Tax Credit— ITA 118.041...........................................................214 First-Time Home Buyers' Tax Credit— ITA 118.05.............................................................215 Volunteer Firefighters and Volunteer Search and Rescue Workers Tax Credits—ITA 118.06 and 118.07..............................................................216 Charitable Donations Tax Credit—ITA 118.1. . . 216 Medical Expense Tax Credit—ITA 118.2...............219 Disability Tax Credit—ITA 118.3............................ 222 Education-Related Tax Credits.............................. 225 Employment Insurance (El) and Canada Pension Plan (CPP)Tax Credits—ITA 118.7 . . . 228 Overpayment of El Premiums and CPP Contributions.................................................229 Transfers to a Spouse or CommonLaw Partner—ITA 118.8........................................230 Political Contributions Tax Credits— ITA 127(3).............................................................. 230 Labour-Sponsored Venture Capital Corporations Credit—ITA 127.4 ........................ 231 Dividend Tax Credit................................................232 Foreign Tax Credits................................................232 Investment Tax Credits.......................................... 232 Refundable Credits.........................................232 Introduction.............................................................232 GST/HST Credit—ITA 122.5................................. 232 Refundable Medical Expense Supplement—ITA 122.51 ..................................... 233 Canada Workers Benefit—ITA 122.7 ................... 234 Eligible Educator School Supply Tax Credit— ITA 122.9 .............................................................. 235 Canada Carbon Rebate Credit/Payment— ITA 122.8 .............................................................. 236 Canada Training Credit—ITA 118.5(1.2) & 122.91................................................................... 237 Multigenerational Home Renovation Tax Credit (MGHRTC)—ITA 122.92 .................... 238 Social Benefits Repayment (OAS and El)............................................... 239 Basic Concepts.......................................................239 Employment Insurance (El) Benefits Clawback. 240 Old Age Security (OAS) Benefits Clawback. . . 240 (Continued) Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 Table of Contents (Volume 1) vii Chapter 4 - Continued Comprehensive Example...............................241 Basic Data..............................................................241 2024 Net Income and Taxable Income..................241 Federal Income Tax Payable................................. 242 Key Terms....................................................... 243 References...................................................... 243 Self-Study Problems (SSPs).......................... 244 Assignment Problems.................................... 244 Recapture on Dispositions of Class 54 Property (Zero-Emission Passenger Vehicles (ZEPV))...................................................298 Recapture on Dispositions of Class 10.1 Property (Passenger Vehicles)—ITA 13(2) . . . 299 Dispositions of Class 14.1—Differences from other Classes................................................. 300 Disposition Summary—Income Tax Consequences.................................................303 CCA Schedule................................................. 303 CCA Determination —Select Special Situations...................................... 304 Separate Class Election......................................... 304 Key Terms....................................................... 306 CHAPTER 5 References...................................................... 306 Capital Cost Allowance Appendix: CCA Rates for Select Depreciable Property................................. 306 Learning Objectives...................................255 Self-Study Problems (SSPs).......................... 309 Introduction................................................ 256 Assignment Problems....................................309 Understanding Depreciable Property............... 256 Income Tax and Accounting Principles Compared......................................................... 258 Additions to Capital Cost.......................... 261 Determination of Amounts................................261 CCA—General Restrictions..............................264 Available-for-Use Rules (ITA 13(26) to (32)) . . . 265 Classes of Depreciable Property (ITR Schedule II)...............................................266 Capital Cost Allowance............................. 268 General Overview............................................. 268 Commonly Used CCA Classes.........................269 The Half-Year Rule (ITR 1100(2)).................... 274 Accelerated Investment Incentive (Accll).... 275 Zero-Emission Vehicles (ZEV, including ZEPV) . 282 Determining CCA—Classes 54, 55, and 56. . . 284 Short Fiscal Periods (ITR 1100(3)).................. 285 Class 14.1.........................................................286 Tax Planning Considerations for CCA..............287 Immediate Expensing for Individuals, CCPCs, and Certain Partnerships —ITR 1100(0.1) to (0.3) and ITR 1104(3.1) to (3.6)........................................................ 288 Extended Limited Immediate Expensing— 2024 Federal Budget............................................. 291 Disposition of Depreciable Property. . . . 292 Overview—Understanding the Basics................... 292 UCC & Dispositions................................................293 Applying the UCC to Dispositions— Examples Revisited................................................294 CHAPTER 6 Income or Loss from a Business Learning Objectives....................................... 317 Introduction.....................................................318 The Importance of a Business................................319 Defining a Business................................................320 Business Income and LossGeneral Principles......................................327 Overview.................................................................327 What Is “Profit"?......................................................328 The 9-12-18-20 General Rule.................................329 Business Income—Inclusions.......................330 Amounts Receivable—ITA 12(1 )(b)......................331 Amounts Received in Advance—ITA 12(1 )(a) . . 331 Quality of Income—ITA 9(1), 12(1 )(a), and 12(1 )(b).....................................................332 Reserves.......................................................... 333 Limitations on Deductions from Business and Property Income........... 338 Expense Analysis.............................................338 Some Specific Limitations—ITA 18..................338 Foreign Media Advertising—ITA 19 and 19.1 . . 349 Business Income —Specific Deductions . . 349 Inventory—ITA 10............................................ 349 Some Specific Deductions—ITA 20................ 351 (Continued) Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 viii Table of Contents (Volume 1) Chapter 6 - Continued Other Limitations on Deductions from Business and Property Income—Subdivision f............................. 354 Introduction........................................................... 354 Reasonableness—ITA 67 .................................... 354 Meals and Entertainment....................................... 355 "Luxury" Automobile Costs.....................................356 Automobiles Owned by the Taxpayer.................... 357 Automobile Leasing Costs—ITA 673 .................... 358 Leasing Property—Some Accounting versus Income Tax Issues...................................... 360 Illegal Payments, Fines, and Penalties— ITA 67.5 and 67.6 ................................................ 361 Reconciliation Schedule................................361 Business Income —Example........................ 363 Example Data.........................................................363 Example Analysis...................................................364 Taxation Year.................................................. 365 General Rules.........................................................365 Non-incorporated Businesses—Fiscal Period. . 366 Special Business Income Situations. . . . 369 Income for Farmers................................................ 369 Professional Income (Work-in-Process [WIP]). . 370 Sale of a Business................................................. 371 Interest Income............................................... 404 General Provision—ITA 12(1 )(c)...........................404 Corporations and Partnerships—Full Accrual Method—ITA 12(3).................................................405 Individuals—Modified Accrual Method— ITA 12(4>.............................................................. 405 The Impact of Discounts and Premiums to Investment Contract Holders.............................407 Accrued Interest on Disposition—ITA 20(14) . . 408 Payments Based on Production or Use-ITA 12(1)(g)........................................ 408 Rental Income................................................. 409 General Rules.........................................................409 Capital Cost Allowances.........................................410 Rental Income Example........................................ 411 Cash Dividends from Taxable Canadian Corporations — ITA 12(1 )(j)..................... 413 The Concept of Integration....................................413 Implementing Integration........................................415 The Gross Up and Dividend Tax credit Mechanism—Eligible Dividends.............................417 The Gross Up and Dividend Tax Credit Mechanism— Non-Eligible Dividends....................420 Mutual Funds.................................................. 423 Key Terms....................................................... 372 Objective.................................................................423 Organization........................................................... 423 Distributions............................................................424 Adjusted Cost Base (ACB)..................................... 424 References...................................................... 373 Other Types of Dividends.............................. 425 Self-Study Problems (SSPs)..........................373 Capital Dividends—ITA 83(2)................................ 425 Stock Dividends......................................................426 Assignment Problems....................................373 Foreign Source Income..................................427 General Rules.........................................................427 Foreign Non-Business (Property) Income.... 428 Foreign Business Income.......................................428 CHAPTER 7 Income or Loss from Property Shareholder Benefits —ITA 15(1) & (2). . . 429 Key Terms....................................................... 430 Learning Objectives.................................. 389 References...................................................... 430 Introduction................................................390 Self-Study Problems (SSPs)..........................431 Income from Property: General Concept Assignment Problems................................... 431 . 391 The Source of Income Analysis....................... 392 Income from Property vs. Business— The Importance................................................ 394 Interest as a Deduction — ITA 20(1 )(c) . . . 394 The Problem with Interest Expense................. 394 ITA 20(1 )(c) Revisited..................................... 395 What Is Interest?.............................................. 396 Direct or Indirect Use ...................................... 397 The Purpose Test.............................................398 Tracing..............................................................398 Discount and Premium on Debt Obligations . . 403 CHAPTER 8 Capital Gains and Capital Losses Learning Objectives...................................... 439 Introduction................................................... 440 Capital Gains and Capital Losses—Overview. . 440 (Continued) Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 Table of Contents (Volume 1) ix Chapter 8 - Continued A Brief Word on the History of Capital Gains and Capital Losses..................................... 441 The 2024 Federal Budget—Inclusion Rate Increased to 2/3............................................ 441 Capital Gain/Loss Concepts.......................... 442 Basic Term inology.................................................442 Select Capital Gain and Capital Loss Topics................................................ 448 Superficial Losses for Individuals—ITA 40(2)(g). 449 Select ACB Considerations—Negative ACB—ITA4013)...................................................... 450 Select ACB Considerations—GST & HST—ITA 248(16)................................................. 451 Identical Properties—ITA 47 ................................ 452 Partial Dispositions—ITA 43................................. 453 Warranties on Capital Property—ITA 42............... 454 Capital Gains Reserves—ITA 40(1 >(a)(iii) .... 454 Bad Debts on Sales of Capital Property— ITA 50(1)................................................................ 457 Loss Restrictions on the Sale of Land and Building—ITA 13(21.1).................................... 458 Principal Residence—ITA 40(2)(b) The Principal Residence Exemption............................. 460 Personal-Use Property—ITA 46 & 54 .................. 464 Gains and Losses on Foreign Currency— ITA 39(1), (1.1), & (2)............................................. 466 Deemed Dispositions—Change in Use— ITA 13(7) & 45(1)................................................... 469 Special Rules for Principal Residences— ITA 45(2) & 45(3)................................................... 473 A Word on Changes in Use and Automobiles. . 477 Deemed Dispositions on Becoming a Non-Resident of Canada—ITA 128.1 .................. 478 Capital Gains Deferral—ITA 44.1.......................... 479 Deferral on Replacement Property— ITA 13(4) & 44(1).................................................. 481 Combined Application of ITA 13(4) and 44(1) . . 485 Capital Gains and Income Tax Planning. . 489 Key Terms....................................................... 489 References...................................................... 489 Self-Study Problems (SSPs)..........................490 Assignment Problems....................................490 CHAPTER 9 Other Types of Income—Subdivision d . . 504 Pension Benefits—ITA 56(1 )(a)(i)........................504 Retiring Allowances—ITA 56(1 )(a)(ii).................. 504 A Word on the Interaction between ITA 56 and ITA 60................................................. 505 Death Benefits— ITA 56(1 )(a)(iii) & 56(1 )(a.1)................................506 Other Income—Deferred Income Plans— ITA 56(1 )(h), (h.1), (h.2), (i), & (t).........................506 Scholarships, Bursaries, and Research Grants—ITA 56(1 )(n) & (o).................................. 507 Social Assistance and Workers' Compensation—ITA 56(1 )(u) & (v)...................... 508 Other Deductions—Subdivision e Deductions................................................ 509 CPP Contributions on Employment and Self-Employed Earnings—ITA 60(e) & (e.1) . . . 509 Moving Expenses—ITA 62 .................................. 509 Child Care Expenses—ITA 63.............................. 513 Disability Supports Deduction—ITA 64..................518 Related Income and Deductions................... 520 Introduction.............................................................520 Pension Income Splitting— ITA 56(1)(a.2), 60(c), & 60.03 .............................. 520 Spousal and Child Support— ITA 56(1)(b) & 60(b)............................................... 522 Annuity Payments Received— ITA 56(1)(d) & 60(a)............................................... 525 Registered Savings Plans..............................526 Introduction.............................................................526 Tax-Free Savings Accounts (TFSAs)— ITA 146.2 .............................................................. 528 Registered Education Savings Plans (RESPs)—ITA 146.1 529 Registered Disability Savings Plans (RDSPs)—ITA 146.4 ............................................ 535 Non-Arm's-Length Transactions...................536 Introduction.............................................................536 Inadequate Consideration—ITA 69 ...................... 537 Inter Vivos Dispositions of Capital Property to a Spouse or Common-Law Partner— ITA 73(1) & (1.01)................................................. 541 Non-Arm’s-Length Dispositions of Depreciable Property—ITA 13(7)(e)..................... 543 Inter Vivos Dispositions of Farm or Fishing Property to a Child.....................................546 Death of an Individual Taxpayer................... 548 Income Attribution..........................................550 Other Income and Deductions, and Other Issues Learning Objectives.......................................501 Introduction.....................................................502 Overview.................................................................550 Basic Rules—ITA 74.1(1) & (2)............................. 551 Avoiding Income Attribution....................................553 I ncome Attribution—Non-Arm 's-Lengt h Loans (ITA 56(4.1))............................................... 555 Tax Planning and Income Attribution..................... 556 Coverage of Chapter 9........................................... 502 (Continued) Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 x Table of Contents (Volume 1) Chapter 9 - Continued Target Benefit Plans..............................................620 Expanded Canada Pension Plan (CPP)............... 620 Tax on Split Income (TOSI) —ITA 120.4 . . 558 Registered Retirement Income Funds (RRIF) — ITA 146.3 ....................... 621 Introduction—Income Splitting............................... 558 Applying the TOSI.................................................. 562 Applying the TOSI.................................................. 562 TOSI—Analytical Summary....................................564 TOSI Example........................................................ 565 Calculation of the TOSI Tax................................... 566 Establishment........................................................ 621 RRIF Withdrawals.................................................. 622 Death of the RRIF Annuitant.................................. 623 Evaluation of RRIFs............................................... 624 Key Terms....................................................... 568 Deferred Profit-Sharing Plans (DPSPs) — ITA 147 ...................................................... 624 References...................................................... 568 General Rules.........................................................624 Income Tax Planning..............................................624 Self-Study Problems (SSPs)..........................569 Assignment Problems....................................569 Employee Profit-Sharing Plans (EPSPs) — ITA 144 ...................................................... 625 CHAPTER 10 General Rules.........................................................625 Part XI.4 Tax on Excess EPSP Contributions—ITA 204.9...................................... 625 Retirement Savings and Other Special Income Arrangements Transfers between Plans............................... 625 Learning Objectives....................................... 583 Retirement Compensation Arrangements (RCA)..................................627 Planning for Retirement.................................584 Introduction.............................................................584 Providing Consistency............................................585 Tax-Deferred Savings.............................................586 RPPs—Defined Benefit vs. Money Purchase Plans...................................................... 588 Registered Retirement Savings Plans (RRSPs)-ITA 146........................................ 589 Basic Operations.................................................... 589 RRSP Deduction Limit............................................594 Examples of RRSP Deduction Calculations . . . .601 Undeducted RRSP Contributions.......................... 602 RRSP and RRIF Administration Fees....................604 RRSP Withdrawals and Voluntary Annuity Conversions............................................................605 Involuntary Termination Due to Age Limitation . 606 Spousal RRSP....................................................... 607 Home Buyers' Plan (HBP)—ITA 146.01 .............. 609 Tax-Free First Home Savings Account (FHSA)— ITA 146.6............................................................... 611 Lifelong Learning Plan I LLP)—ITA 146.02. . . . 613 Ceasing to Be a Resident of Canada.....................614 Death of the RRSP Annuitant................................ 615 Accumulated Benefits.............................................625 Retiring Allowance Transfers—ITA60(j.1). . . . 626 The Problem........................................................... 627 Arrangements Defined............................................628 Part XI.3 Refundable Tax—ITA 207.5 ................. 628 Unfunded Plans...................................................... 629 Salary Deferral Arrangements (SDA). . . . 629 The Problem........................................................... 629 The Solution............................................................629 Individual Pension Plans (IPPs).................... 630 Key Terms.......................................................631 References......................................................631 Self-Study Problems (SSPs).......................... 632 Assignment Problems....................................632 Index.................................................................1-1 Study Guide Your two volume textbook is accompanied by a sep arate Study Guide that is available in print and online. The chapters of this Study Guide correspond to the Registered Pension Plans (RPPs)—HA 147.1. .617 chapters of Byrd & Chen's Canadian Tax Principles. Establishing an RPP...............................................617 Employer Contributions to the RPP....................... 617 Employee Contributions to the RPP.......................618 Options at Retirement.............................................618 Phased Retirement.................................................618 Inadequate Retirement Savings.................... 619 The Problem........................................................... 619 Pooled Registered Pension Plans (PRPPsf— ITA 147.5................................................................ 619 Each of these Study Guide chapters contains the following: • Detailed solutions to the Exercises and SelfStudy Problems in the textbook for the chapter • A list of learning objectives for the material in the chapter • An extensive glossary Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 xi Consistent with the title of this textbook, our objective is to instill a solid understanding of the basics of income tax and GST/HST through an appreciation of the tax principles, concepts, and unique vocabulary that make up the framework upon which the Canadian tax system has been built. This level of understanding is not solely directed at a theoretical or academic level; con siderable emphasis is placed on practical, everyday situations in preparation for careers where an understanding of tax in some form will be helpful at a minimum and essential at best. The textbook will provide you with the elementary tools necessary to develop an awareness to help identify, analyze, and apply the tax law to a wide range of subjects ranging from determining the income tax liability or refund of individuals earning employment income; carrying on a business; earning investment income, including the implications of selling investments; identifying potential income tax benefits directed at students; investing in Tax-Free Savings Accounts (TFSAs), First Home Savings Accounts (FHSAs), and Registered Retirement Savings Plans (RRSPs); and understanding how the income tax law applies to corporations, trusts, and partnerships to provide you with an understanding of the circumstances under which these various types of entities should be used. Our approach breaks down the necessary parts of the legislation, such as the Income Tax Act (ITA) and the Excise Tax Act (ETA), and employs reference materials and interpretations of the Canada Revenue Agency (CRA) and long-standing legal and tax principles developed through the courts, all with the goal of simplifying, to the extent possible, the tax learning environment to achieve success. We have provided numerous examples and step-by-step analysis together with an abundant supply of exercises and problem material to facilitate your journey through the world of Canadian tax. For those pursuing CPA certification, we have ensured that the tax coverage is consistent with that required of CPA Canada as indicated for core level competencies in the most recent CPA compe tency map. As the leading introductory income tax textbook in Canada, we recognize the importance and significance of all Canadians and the unique features of the Canadian income tax system appli cable to specific groups of Canadians. The ITA, for example, contains a very specific rule in ITA 87(1 )(a) that provides the basis for an exemption from Canadian income tax—be it federal, pro vincial, or territorial—for First Nations individuals. This specific rule was not covered in introduc tory Canadian income tax textbooks, even though over 1 million First Nations individuals are potentially impacted. In this regard we are pleased to continue to be the first introductory text book on Canadian income tax to devote coverage to the federal taxation issues faced by the First Nations Peoples of Canada as a result of this income tax rule. Coverage can be found in Appendix A (introduced in the 2022-2023 edition) of Chapter 11. Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 xii Preface Features Study Guide__________________________________ The main objective of the Study Guide is to provide students with convenient access to the solu tions for the Exercises included in each chapter of the textbook and solutions to the Self-Study Problems (SSPs), which are available for download from My Lab Accounting. Having these solu tions in a separate volume makes it easy for students to simultaneously view the problem while solving it and then consult its complete and detailed solution. The Study Guide also provides the following: • Each chapter’s learning objectives are provided. Students can use these to ensure they understand the relevant subjects covered in each chapter. • At the end of each chapter in the textbook there is a list of key terms that were used in that chapter. All of these terms are alphabetically listed in a glossary at the end of the Study Guide. This provides an easy way to find the meaning of a word, term, or expression intro duced in one chapter, but is being referred to again in a subsequent chapter. Features The Canadian Tax Principles package contains a large number of problems, solutions, features, software problems and solutions, and examples to help guide you through your course in taxation. Learning Objectives A detailed list of learning objectives is available at the beginning of each chapter and in the Study Guide. This allows you to check your understanding of the relevant subjects covered in each chapter. Exercises These are short problems that are focused on a single issue. Exercises are presented throughout the chapters, directly following the relevant material. Solutions to the Exercises are in your Study Guide. This provides you with immediate feedback as to whether you have understood the material you have just read. Self-Study Problems (SSPs) These problems are more complex than the Exercises and include a number of comprehensive problems often with multiple issues. We have marked the points within chapters where you should stop and complete each SSP The SSPs are available on MyLab for download as well as in the Study Plan, and the solutions are available in your Study Guide. Tax Software Self-Study Problems (SSPs) These SSPs are designed to be solved using the ProFile software that is available for users of Canadian Tax Principles. Starting with this edition, these problems have been placed on MyLab. Now the problems, solutions, and completed income tax returns are all in one place and available as one package to download. Tax Software SSPs continue to be available in PDF or ProFile format. Look for updates on MyLab in the new year, as these will be updated to reflect the taxation year that has passed. For example, in January 2025 the ProFile software will generally be available with respect to filing the income tax return for the 2024 taxation year. Assignment Problems (APs) These problems vary in difficulty and include the most difficult, comprehensive problems in the textbook. They are found at the end of each chapter. Solutions to these problems are available to instructors only. Tax Software Assignment Problems (APs) Starting with this edition, Tax Software APs have been placed on MyLab, along with other tax software-related material. This includes Tax Software APs dealing with personal income tax returns (T1) for Chapters 4 Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 Preface xiii What's New in this Edition and 11, and corporate income tax returns (T2) for Chapter 14. Solutions to Tax Software APs are available to instructors only. Look for updates on MyLab in January 2025, as these will be updated to reflect the 2024 taxation year that has just passed. Comprehensive Assignment Problems (APs) These are the most challenging type of problem material in the textbook. They are cumulative in that they incorporate issues from previous chapters. There are two Comprehensive APs per chapter in Chapters 6 through 11, found at the end of the chapter. Solutions to these problems are available to instructors only. Income Tax Returns Starting with this edition, income tax return examples have been placed on MyLab, along with other tax software-related material. These provide useful practice for using the ProFile tax software. The income tax returns and completed files are downloadable on MyLab, either in PDF or ProFile format. Glossary At the end of the Study Guide is a comprehensive glossary that defines the key terms used throughout the textbook. Tied to this important resource, at the end of each chapter you will find a list of the Key Terms that are used in that chapter. This provides an additional resource for reviewing the textbook material in that, by reviewing this list, you can ensure that you are familiar with all of the concepts that are presented in each chapter. What’s New in this Edition In this edition we have endeavoured to continue the process of modifying existing content to pres ent facts and circumstances that are both practical and that students are likely to encounter in the course of their careers. In addition, and in recognition that income tax continues to evolve on an ongoing basis, we have added new content to address topics that are both relevant and current, including changes to legislation that often affect federal annual budgets and federal annual eco nomic fiscal updates, plus other federal legislation designed to address myriad issues, most often to close tax loopholes or to override decisions of the courts that the federal government views as unacceptable. Finally, one of our objectives is to provide educators with material that explains the changes between each edition to facilitate the annual transition. The following specific additional features are included with this 2024-2025 edition: WHAT'S NEW (Chapter by Chapter) We also continue to recognize the contributions of those many professors, instructors, and educators who have consistently used Canadian Tax Principles at colleges, universities, and other educational institutions for years. In revising and updating this edition we have again prepared a list of changes to each chapter that highlight specific and signifi cant changes made to each chapter, including exercises and other problem material, to facilitate the preparation process for the 2024 taxation year. These list of changes is titled "What's New" and is available for each chapter, providing a bridge between this and previous editions as well as a roadmap to the application of this edition. The "What's New" documents for all chapters of this edition can be found on MyLab, under the "Instructor Resources" tab. Some examples of the more substantial changes made to chapters include (1) a rewrite of the CPP and El coverage in Chapter 3 to provide additional detail to determine the income tax consequences to all persons, whether employees, employers, or self-employed persons; (2) coverage of the new short-term rental property restrictions in Chapter 7; (3) coverage of the controversial 2024 federal budget proposal to increase the capital gains inclusion rate from one-half to two-thirds effective June 25, 2024; (4) revision of the new AMT rules in Chapter 11 to reflect this new system, which became effec tive January 1,2024; (5) expanded discussion of the employee ownership trust rules in Chapter 19, including the proposed $10 million capital gain exemption; and (6) the addition of a new refer ence section for Chapter 21, which lists the relevant sections of the ETA. LEGISLATIVE CHANGES (Chapter by Chapter) In this 2024-2025 edition, we have again continued with the creation of a document that is designed to quickly inform instructors of the Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 xiv Preface MyLab legislative changes since the last edition (2023-2024) that impact the topics in each of the 21 chapters, noting that there were no changes for Chapters 6, 12,13,15,16, 17, and 18. Each men tioned change includes a brief description of that change, the legislative source, the specific paragraph or paragraphs of the 2024-2025 textbook affected, and the implementation date (pro posed or otherwise). Details of each change can be found in the new or revised paragraphs indicated. We would add that it is our intent to only include those legislative changes in the prob lem material if they had become law by the date of the 2024 federal budget, which was April 16, 2024, with one exception—the alternative minimum tax (AMT), which will become law in 2024. This legislative summary is available to instructors on MyLab under the Instructor Resources tab. OTHER CHANGES In this edition a few additional changes have been made from the 2023-2024 edition: • Four New Practical Cases: We have developed and added four new cases that cover the main sources of income; namely, (1) employment income (Chapter 3), (2) business income (Chapters 5 and 6), (3) property income (Chapter 7), and (4) capital gains and capital losses (Chapter 8). For each case, the student is presented with that part of an income tax return that relates to the type of income. The student is required to identify what is correct and what is incorrect, adding explanations as to why a particular item is correct or incorrect, including calculations or explanations where necessary. Each case limits content to the particular chapter. These cases are available on MyLab both as downloadable files under the Chapter Resources tab and assignable questions in the Study Plan. • Tax Software-Related Content: The income tax examples, Tax Software SSPs, andTax Soft ware APs have been consolidated into one location on MyLab. These can now be easily located in one place, rather than different parts being in the chapters. Study Guide, and online. Solu tions to Tax Software APs continue to be available only to instructors. MyLab_______________________________________ MyLab is the teaching and learning platform that empowers you to reach every student. By com bining trusted author content with digital tools and a flexible platform, MyLab personalizes the learning experience and improves results for each student. Learn more about MyLab Accounting at https://mlm.pearson.com/northamerica/myaccountinglab/. Pearson eTextbook This eTextbook gives you access to the text whenever and wherever you have access to the inter net, through various devices. It contains the content of both volumes of the text and the Study Guide. The eTextbook pages look exactly like the printed text and offer powerful functionality. You can create notes, highlight text in different colours, create bookmarks, zoom, and search. Data Analytics Project In the Data Analytics Project, you will analyze a comprehensive data set and make a series of accounting decisions. This assignment is designed to prepare you for the data analytics competen cies that have been included in recent CPA Competency Maps. You will use Excel-based tools to assess data for accuracy, then organize and filter large quantities of information to make the data appropriate for income tax calculations. You will then incorporate income tax concepts, including the calculation of net income, taxable income, and income tax payable using the outputs of your data analysis in Excel. This assignment also includes data visualization and incorporates income tax planning concepts for a business. This is assignable from your instructor on MyLab. Also see the coverage in this Preface for an introduction to data analytics in taxation and how it applies to Canadian Tax Principles. Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 Preface xv MyLab CPA Competency Alignment Map Originally developed by Ann Bigelow, Western University, and revised for this edition by Victor Waese, British Columbia Institute of Technology, this downloadable file ties the chapters to the CPA Competency Map for 2024. Students can use this mapping to understand the level of depth required for each broad topic area that is covered in taxation at the Entry, Core, or Elective course levels. Practice Examinations A 90-minute practice examination, along with a solution and suggested marking guide, is available for each of the chapters in MyLab, both as downloadable files under the Chapter Resources tab and assignable tests in the Study Plan. These examinations contain a variety of problems, including multiple choice, true/false, essay questions, and longer problems. The goal of Practice Examina tions is to allow you to evaluate your ability to write the examinations in your tax course. To get the maximum benefit, you should write it under examination conditions, within a 90-minute time con straint. The materials that you use while writing this Practice Examination should be consistent with the materials that will be available during the examinations that you will be writing in your tax course. Download the Practice Examinations and solutions from MyLab. Supplementary Self-Study Problems Additional self-study problems, along with solutions, are available for students to continue to prac tise concepts as they proceed through the course. PowerPoint Presentations Revised by Sandra Pereversoff, Southern Alberta Institute of Technology, these PPTs provide the basis for a quick review of the material covered in each chapter. They are available on MyLab. 2024 Tax Rates, Credits, and Common CCA Classes This is available as a PDF file, for reference. This tax information is also available at the front of Volumes 1 and 2, and CCA classes are available in the Chapter 5 Appendix. Glossary Flashcards To assist in this review, Glossary Flashcards are available on MyLab to further help test understand ing of key terms in each chapter. ProFile Tax Return Preparation Software Access to Intuit Canada's professional tax preparation software, ProFile, is available free of charge to users of Canadian Tax Principles. Visit https://www.intuit.com/ca/partners/education-program/ registration/student-profile-tax/ to register and for technical support. Be sure to visit their ProFile Community pages to make use of the webinars, how-to videos, and tutorials they provide to help you learn to use the ProFile software, at https://profile.mtuit.ca/ support/training/. Learning Catalytics Learning Catalytics™ allows students to use any web-enabled device to participate in class. Instructors can access a library of prebuilt questions or construct questions on their own to keep students engaged in the lecture. Learning Catalytics can be assigned to students syn chronously or asynchronously and used for individual or group work. It can also place students in discussion groups based on their responses and location, regardless of class size. Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 xvi Preface Acknowledgments Freehand Grader Freehand Grader (beta) is the grading technology in MyLab® and Mastering® that creates an authentic assessment experience for both instructors and students. Freehand Grader, available as a new assignment type, allows you to quickly grade any kind of handwritten assignment. As you grade, you indicate the grading criteria and build the rubric question by question. This grade-asyou-go approach lets you add notes to provide students with individual feedback. Students upload their handwritten solutions, including all the steps that went into their responses. Their work pro vides insight into their thought processes, showing what they know, not just a final answer. Instructor Supplements________________________ Supplements are available for download from the MyLab Accounting Instructor Resources page. Contact your Pearson representative for access information and instructions if you don't have a MyLab account. What's New (Chapter by Chapter) These downloadable files summarize significant changes made to each chapter, including a concordance of exercises and other problem material, to facili tate the preparation process for the upcoming year. These provide a bridge between this and previ ous editions as well as a roadmap to the application of this edition. Legislative Changes Overview In order to simplify the legislation that directly impacts this text book for the 2024 taxation year, a legislative changes overview document is available on MyLab. This summary is broken down by chapter and addresses those changes that have been incorpo rated in some manner in each chapter. Instructor's Solutions Manual (ISM) The ISM contains full solutions to all of the Assignment Problems, including Comprehensive Assignment Problems, in the chapters. These problems vary in difficulty and include the most difficult non-comprehensive problems in the text. Solutions to Tax Software Assignment Problems Solutions to the Tax Software Assignment Problems in Chapters 4 and 11 (individuals) and 14 (corporations) are available as an instructor download. This package includes both ProFile and PDF versions. Look for updates on MyLab in the new year—current calendar year updates take place in the first few months of the following calen dar year. This means that the 2024 tax return information will generally be available with prepared solutions by the end of February 2025. PowerPoint (PPT) Presentations Revised by Sandra Pereversoff, Southern Alberta Institute of Technology, these PPTs provide the basis for a quick review of the material covered in the chapter. They are available on MyLab. TestGen Test Bank TestGen is a powerful assessment generation program that helps instructors easily create and print quizzes and exams from a wide range of tax topics. Download TestGen from MyLab. Also available are print-ready Word versions. Problem Concordance This downloadable file provides concordance of problem material (now including Exercises as well) between the 2023-2024 and 2024-2025 editions. Acknowledgments_____________________________ In the normal course, Canadian Tax Principles requires regular annual updates that incorporate changes in tax credits, tax rates, and the numerous federal budget and other legislative changes made annually to both the income tax law and the GST/HST. Court cases and new or changed inter pretations by the CRA add to the difficulty of ensuring that each and every edition reflects the current state of the law in all material respects. While maintaining the technical accuracy and integrity of such a textbook is a considerable task by itself, it would be impossible without the support of a team of experienced and dedicated professionals who largely remain offstage and in the background but whose responsibilities take the textbook to new heights. In this edition I was once again very fortunate Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 Preface xvii About the Author to have the support of the best team of professionals I have had the pleasure of working with. A very special thanks go out to Suzanne Simpson Millar (Queen Bee), an editorial guru who again guided me through the process ensuring that this well-oiled machine remained on track. I would also like to thank the tireless work of copyeditor and proofreader Leanne Rancourt and the efforts and dedication of Executive Product Manager Keara Emmett in the Higher Education division of Pearson Canada. I would also like to send out a special thanks to Michelle Malin, associate professor in the Depart ment of Accounting and Finance at MacEwan University in Edmonton, Alberta. Michelle has sig nificant teaching experience and has been working with Canadian Tax Principles for many years. Michelle reviewed a significant part of the textbook and MyLab, including much of the problem material, providing the benefits of her teaching experience and income tax expertise in ensuring there were no numerical errors. I would also like to thank the many teachers and thousands of students who have made valuable comments and suggestions over the years to help shape the text to where it stands today. I look forward to continued collaboration in the years ahead. Over the last year the following individuals pointed out specific errors that they had identified that went into our Errata document and was of tremendous value in improving the textbook. • • • • • • • • • • • • Dennis Gee, Professor, JR Shaw School of Business, NAIT Sandra Pereversoff, Professor, Southern Alberta Institute of Technology Jay Perry, Professor, Niagara College Hala Rawji, Professor, British Columbia Institute of Technology Ruth Ann Strickland, Professor, Western University Victor Waese, Instructor, British Columbia Institute of Technology Richard Wong, Professor, UBC Sauder School of Business Navdeep Bhango, Student, Western University Maryam Imran, Student, UBC Sauder School of Business Pawanpreet Kaur, Student, Seneca College Emily Lai, Student, UBC Sauder School of Business Yusham Xie, Student, Western University About the Author______________________________ Gary Donell I began working with the C.A. firm of Thorne Riddell in Montreal in the early 1980s. A few years later I made the move to Ottawa to begin my career with Revenue Canada, now the CRA. I spent 30 years at the CRA, retiring in 2015. In my early years with the CRA I was an income tax auditor and was anxious to move on toother pursuits within the CRA, of which there were many. In preparation I read every income tax-related publication and textbook I could get my hands on, including legal books on statutory interpretation and the transcripts of every income tax court decision. While vacation and beach goers were reading the latest New York Times bestseller I was reading from the latest tax conference report and tax journals. Eventually it all paid off when an opportunity arose to teach introductory income tax to CRA auditors in the late 1980s. I jumped on the opportunity and taught for a couple of years before applying for a job with the Income Tax Rulings Directorate of the CRA in Ottawa. The Rulings Directorate is responsible for income tax interpretations and, at the time, technically reviewing every form, pub lication, and tax guide published. I spent 10 years at Rulings and learned a lot, but the teaching and education bug wouldn't let go of me after all those years. I returned to the training and education division of the CRA halfway through my career, where I spent the next 15years teaching thousands of CRA auditors and writing a dozen or so courses on a wide range of income tax topics from an introductory to advanced level. Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 xviii Preface About the Author Shortly after retiring from the CRA I went to work as a consultant with Welch LLP in Ottawa where I spent the next five years dealing with practical, everyday client issues, which was very rewarding thanks to then tax partner, Don Scott, and the many amazing people I had a chance to work with. I participated in in-house training and was involved in the writing of the annual CPA income tax update course, which Welch had been writing for many years. I also spent those same years teach ing a dozen or so advanced tax courses for CPA Ontario. To come full circle, my journey with Clarence Byrd and Ida Chen began in the early 1990s while working for CRA Rulings. I had just picked up the latest edition of the textbook (the 1991-1992 version, I believe) and had contacted them after finding a few errors. Clarence reached out, and the rest is history. I acted as the technical consultant for Clarence for the next 28 years. Today I sit back thinking to myself that I have been indirectly preparing for this lead author role the better part of my life. I have amassed private sector experience working with accounting firms, CRA insider experience, course writing experience, and 20 years of teaching experience on top of it all. This wealth of different experience gives me a unique perspective that has allowed me to shape introductory income tax education. Income tax is ripe for the picking these days as opportunities abound both within the CRA and in the private sector. Unfortunately, many students choose to stay clear of income tax, believing it too difficult a subject. I can attest to the fact that the basic concepts and principles are not all that difficult to understand when properly and gradually presented. You will find that income tax is not only interesting but enlightening in terms of just about every aspect of Canadian life. Armed with a solid understanding of income tax principles you may find yourself join ing the ranks of tax specialists one day, but in the meantime this textbook will provide you with a solid foundation that you can build on should you so choose. It’s Our Fault We have made every effort to accurately explain and clarify, with plenty of examples and problems, the income tax law and the GST/HST topics covered within this textbook. Behind the scenes there are multiple individuals (including myself) who are part of the process of reviewing every word of the textbook, including problems and solutions, to ensure accuracy throughout. I learned early on, how ever, that perfection is an elusive target. While we endeavour to attain perfection, realistically it is generally impractical. As a result it is certain that some errors were missed. These errors are our fault and we take full responsibility, apologizing in advance for any confusion they may cause. Should you come across any of these errors we encourage you to reach out to https://www.pearson.com/ca/en/ support.html to let us know so that we can further improve future editions. Gary Donell, May 2024 Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 Preface xix Introduction to Data Analytics in Taxation Introduction to Data Analytics in Taxation_________ Over the last few years there has been an increasing trend toward enhanced computer capabili ties, including Al or artificial intelligence platforms, that allow for greater analysis of data over a wider spectrum and for multiple purposes. The data analysis process can lead to the broad cre ation of unique algorithms targeted at increased efficiency in terms of resource allocation, an overall improvement in current business performance, together with tools to predict behaviour and trends that significantly impact future success and endeavours. The analysis process, how ever, can also be narrowed or streamlined to deal with day-to-day matters that may reveal errors and potential improvements, as well as service and compliance issues when it comes to ongoing client interactions and regulatory concerns with respect to tax and other matters. Globally we refer to these processes as ‘'data analytics," which were recently included within the purview of CPA Canada's "CPA competencies" that stress the importance of a practical level of comprehen sion for those pursuing careers in fields such as business, accounting, and both income tax and GST/HST Many of us have already been exposed to the power of data analytics through the efforts of ser vice providers such as Netflix and Amazon. These and other providers of goods and services use data provided through past transactions that is accumulated, measured, and analyzed to provide custom-made communications that inform us of goods and services that are likely to be of inter est to us. While there are at times privacy issues and concerns that cannot be ignored, the objective of data analytics is to use data at our disposal for the purposes of enhancing business performance, improving public relations, and in general identifying problems and their solutions as well as ensur ing compliance in the applicable regulatory environments. The Basics Successful data analytics requires a reporting system that accumulates accurate and reliable information in a timely manner. The information should include multiple parameters that provide an opportunity for increased flexibility in handling information as required. For example, a business with significant credit sales may want to ensure that the accounts receivable data include informa tion related to the credit-worthiness of clients to assist in identifying and reducing potential bad debt write-offs, including factors that cause a difference between accounting and income tax. Additional factors may include whether the time of year is influential, whether certain economic factors and trends should be considered, and stratification of data based on dollar amounts, num ber of days accounts are outstanding, and so on. The ultimate objective is that information be readily accessible within a system to be in a position to cherry-pick necessary information as war ranted by specific circumstances. A system that has simply recorded only the basic essentials limits the capability to perform enhanced data analytics, which may in turn impede the profitability of the business. Basic Data Analytics in the Private Sector Data analytics in the private sector is in the early stages within many Canadian businesses other than those larger corporations, mostly public, that operate on a global basis in multiple countries. These larger Canadian companies face concerns as a result of operating in multiple tax jurisdictions with multiple variations in tax rates, including the value added tax (VAT), the Canadian equivalent of GST/HST, plus customs duties when products cross international borders. In recent years the efforts of the Organisation for Economic Co-operation and Development (OECD), of which Canada is a member, has placed added emphasis on the "Base Erosion and Profit Shar ing" (BEPS) initiative, which is designed to address what the OECD views as efforts by the world’s largest companies to avoid home country taxation by engaging in a variety of cross-border transac tions viewed by tax authorities as problematic. As a result, such companies today are subject to Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 xx Preface Introduction to Data Analytics in Taxation onerous reporting requirements that involve providing considerable data to tax authorities on an ongoing basis. These corporations use data analytics to determine the optimum efficiencies in each jurisdiction in which they operate, which includes the level of activity and income and other taxes and charges paid. The analysis allows them to realign operations, where necessary, in a timely manner. Data Analytics and the CRA Data analytics within the public sector, such as the Canada Revenue Agency (CRA), has been used extensively for years. The CRA is provided with millions of filed income tax and other returns each year. This wealth of information has historically been used by the CRA to assist in allocating audit resources where the need is greatest. While a random selection of Canadians are chosen for audit annually, the trend has been to use data analytics to develop algorithms that, often based on audit experience, has assisted in merging certain factors to identify files with a high probability of identifying taxpayers who have underpaid their income tax and GST/ HST obligations. The CRA employs data analytic techniques with data from multiple sources, including filed tax returns, published industry data, data provided by corporate law authorities within Canada, data from land registry and other property title registries, police and informants, and even other coun tries. These data when accumulated represents a treasure trove of information that when manip ulated in the development of algorithms is quite successful at proving productive in terms of areas where compliance is an issue. An algorithmic initiative launched by the CRA in 2015 identi fied potential underreported tax obligations with respect to real estate transactions in both Van couver and Toronto. For the period April 2015 to March 2020 the CRA audited 52,477 files, which yielded $1,554 billion in tax revenues, an average of almost $30,000 per file. This is a good example of the power of data analytics in terms of resource allocation. The CRA has been making increased expenditures both to hire new auditors and to purchase new technology to further enhance targeted efforts. The recent results of the use of data analytics by the CRA is that they have identified rental prop erty owners, farmers (particularly cattle ranchers), child day care providers, hardware stores, accommodation and ride sharing providers, music streaming, crowd funding, graphic design busi nesses, and mining and oil and gas extraction businesses as businesses with an increased likeli hood of underpaid taxes. In addition, the CRA has identified issues with certain expenses, such as expenses for vehicles, home offices, office supplies, meals and entertainment, advertising, and incorporation expenses as worthy of increased audit attention. Finally, the CRA is pursuing additional sources of information to enhance its data analytic capa bilities. These sources include T4A reporting for professional fees, increased reporting for trusts (particularly family trusts), reporting on the sale of principal residences, and an increased effort to access accountant working papers and the issuance of information requirements (RFI). An RFI is a demand for information. Recently the CRA requested Rona Hardware to make its loyalty pro gram information available. A court challenge by Rona proved unsuccessful. The RFI allowed the CRA to identify contractors participating in the loyalty program to be identified with respect to cash purchases that led to unreported income. Other businesses such as PayPal have also been issued RFIs. Data Analytics in Introductory Taxation Data analytics requires a reporting system that accumulates accurate, comprehensive, and reliable data that can be used to assess many important factors to taxpayers depending on the circum stances. Many of the important uses to which data analytics can be applied relate to compliance matters for businesses, property income such as rental properties, and employment expenses. These uses also predominate when it comes to identifying areas of interest to the CRA in terms of accurate income tax reporting. The ability to access the relevant information within the accounts of Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 Preface xxi Introduction to Data Analytics in Taxation a taxpayer is critical to the analysis. The following represents a list of some of the more common identifiable items for data analytics: Interest Expenses Interest incurred by a taxpayer that is not deductible for income tax purposes leads to a conclusion that charges may relate to compliance matters such as late filing, tax audits, late filed election, and late payments of income tax including insufficient withholdings and instalments. In addition, if the taxpayer is a corporation there is greater flexibility provided for tax payments and instalments but only if the corporation is fully compliant in both income tax and GST/HST. • Penalties The identification of non-deductible penalties can lead to many conclusions since there are numerous types of penalties for various infractions. Identifying the reasons behind the penalties may result in taking corrective action in future years. Penalty and interest identi fication may also result in action to recover the amounts through taxpayer relief applications. • Legal and Professional Fees Determining the reasons behind these expenses, particu larly larger than average changes, is important since they may relate to compliance matters relating to tax audits and notices of objection. • Contracts Analyzing the existence of contracts to determine taxpayer risk where the work performed by the contractor is similar to work performed by employees. This would be particularly relevant for contractors who were ex-employees. Employer risks include CPR El, and other employee-related premiums together with interest and penalty charges. • Taxable Benefits The reporting of taxable benefits should be scrutinized to ensure that the reporting is accurate and reflects appropriate GST/HST treatment. Where a taxpayer is a corporation, transactions between the corporation and related family members should be compared to transactions with other employees. • Stock Options (Emerging Trends) Beginning in July 2021, new stock option rules came into effect. Determining whether the corporate taxpayer and its employees are subject to the new rules is important in understanding income tax obligations to both the corporate employer and employee recipients of such benefits. • Employee Expenses Employee expenses are generally not deductible unless a valid T2200 form has been signed by the employer. The ITA sets a series of contractual condi tions that relate to the nature of any contractual commitments by employees. Ensuring that these conditions have been met is key to an employee claiming expenses. • Travel Expenses These expenses may lead the CRA to increased taxable benefits or an indication that there is a permanent establishment situated outside of Canada. • Advertising Expenses There are many restrictions on the deduction of certain advertis ing expenses, particularly those incurred outside of Canada. Identifying the details of such expenditures will facilitate a determination of best advertising practices from an income tax perspective. • Capital Expenditures The acquisition of certain depreciable property may entitle the purchaser to increased tax benefits such as accelerated depreciation (CCA) that may dou ble the usual first-year tax deduction to allow all of the cost to be expensed. Ensure that the conditions for the tax deductions apply since the expenditure may have considered the after-tax cost as a condition of making the purchase. • Sales of Depreciable Property Ensure that the disposition by sale or trade-in is accu rately determined. This is particularly important where a business is sold along with all of the business properties. • Type of Income Identifying and categorizing the type of income (business versus prop erty) becomes critical in the case of a private corporation. Looking to cash account bal ances will help identify income that may be considered connected to a business even though it appears to be investment-type income. Manipulating cash flow to achieve the low tax cost business income becomes important in current and future years. • Capital Gain Transactions Determining the details of such transactions, including the type of property sold, the period of ownership, the identification of the person from whom the property was acquired and sold, the reasons for the purchase, and the reasons for the sale, will help identify potential challenges by the CRA. • Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 xxii Preface Introduction to Data Analytics in Taxation Data Analytics Conclusion Data analytics provides businesses and others with a set of newly designed tools that utilize enhanced computer capabilities to analyze internal and external data in a manner that can greatly improve efficiencies by identifying areas of concern as well as areas of opportunity and improve ment. The development of action plans to correct these inefficiencies and optimize short- and long term goals is critical to the success of any entity. Data analytics employs a process where creativity can play an important role in using this valuable tool to the best advantage. CPA Competencies in data analytics that are relevant to this title: Assesses reporting systems, data requirements, and business processes to support reliable tax compliance 6.1.2 a) Explains the importance of reliable tax data obtained from transaction processing systems 6.1.3 Explains implications of current trends, emerging issues, and technologies in taxation a) Identifies current trends, and recent updates, in taxation b) Explains the implications of impending changes and their impact on an entity c) Explains the potential impact of emerging issues and technologies in taxation Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 2024 Rates, Credits, and Other Data xxiii Information Applicable to Individuals 2024 Rates, Credits, and Other Data A downloadable version of this document is available as a PDF from MyLab. Information Applicable to Individuals Federal Tax Rates for Individuals (Based on a 4.7% indexed rate for 2024) Taxable Income in Excess of $ -055,867 111,733 173,205 246,752 Federal Tax Marginal Rate on Excess $ -08,380 19,833 35,816 57,145 15.0% 20.5% 26.0% 29.0% 33.0% Federal Tax Credits for Individuals—Personal Tax Credits (ITA 118) Reference 118(1.1) Basic Personal Amount (BPA) Each individual is entitled to one BPA plus a second BPA if that individual supports a spouse, common-law partner, or eligible dependant if certain condi tions are met. There are three BPA alternatives each dependent on net income (not taxable income). • $15,705 for individuals with net income of $173,205 or less; • $14,156 for individuals with net income of $246,752 or higher; • Prorated for individuals with net income between $173,205 and $246,752 calculated as $15,705 -1$1,549][(net income - $173,205) -r $73,547] Individuals Who Are Legally Married or in a Common-Law Partnership 15% of the BPA of the individual. A common-law partnership is defined for income tax purposes in ITA 248(1) and is generally different than the ordinary meaning of a common-law relationship. 118(1 )(a) Supported Spouse or Common-Law Partner 15% of the same BPA amount of the individual claiming the credit and: if the spouse or common-law partner of the individual is dependent because of a mental or physical infirmity, there is an additional amount of $2,616 added to the BPA The total of these two amounts is reduced by the net income of the individual's spouse or common-law partner. Note that it is the BPA of the individual claiming the credit that is used and not the BPA of the spouse or common-law partner who is claimed. 118(1 )(b) Supported Eligible Dependant 15% of the same BPA amount of the individual claiming the credit and: if the dependent person is dependent because of a mental or physical infirmity, there is an additional amount of $2,616 added to the BPA. The total of these two amounts is reduced by the net income of the dependent person. Note that it is the BPA of the indi vidual claiming the credit that is used and not the BPA of the eligible dependant who is claimed. Note that this credit for an eligible dependant cannot be claimed if there is a spouse or common-law partner unless there is a separation or divorce. ll8(D(b.1) Canada Caregiver Credit for Child under 18 15% of $2,616. Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 xxiv 2024 Rates, Credits, and Other Data Information Applicable to Individuals Single Individuals Not Legally Married, Not in a Common-Law Supporting an Eligible Dependant 15% of the BPA of the individual. Partnership, and Not 118(lXdJ Canada Caregiver Credit 15% of $8,375, reduced by 15% of the dependant’s net income in excess of $19,666. This credit applies to an infirm individual who is a spouse, common-law partner, or a dependant who is 18 years of age and older. A dependant is defined in ITA 118(6). 118(1)(e) Additional Canada Caregiver Credit When a supporting person is entitled to claim an individual as an eligible dependant or a spousal or common-law partner credit and is also eligible to claim the caregiver credit for that same individual the ITA prohibits the claiming of the caregiver credit (ITA 118(4)(c)). In this case, if the caregiver credit calculation exceeds the credit amount that could have been claimed for an eligible dependant or a spousal or common-law partner credit then 15% of the difference can be claimed as a separate additional caregiver credit. In general, this additional credit will apply in 2024 when the net income of the supported individual is between $9,947 and $28,040. 118(2) Age Credit The age credit base is $8,790. The base for this credit is reduced by 15% of the amount by which the individual's net income exceeds $44,325. Not available when income reaches $102,925. Part or all of this credit can be transferred to a spouse or common-law partner. 118(3) Pension Credit 15% of up to $2,000 of eligible pension income. Part or all of this credit can be transferred to a spouse or common-law partner. The pension credit is not subject to annual indexing (ITA 1171(2)). 118(10) Canada Employment Credit 15% of the lesser of $1,433 and the individual's employment income for the year. For the purpose of this credit, employment income is determined without considering any deductible employment expenses. Other Common Federal Personal Tax Credits (Various ITA) 118.01 Adoption Expenses Credit 15% of eligible expenses (reduced by any reimbursements) up to a maximum of $19,066 per adoption. 118.02 Digital News Subscriptions Credit 15% of the lesser of $500 and the cost of qualifying sub scription expenses. Note that the last year that this credit will be available is 2024 and that the credit is not eligible for annual indexing (ITA 117.1 (2)). 118.041 Home Accessibility Credit 15% of the lesser of $20,000 and the amount of qualifying expendi tures for the year. Note that this credit is not eligible for annual indexing (ITA 117.1(2)). 118.05 First Time Home Buyers' Credit 15% of $10,000 of the cost of an eligible home. Note that this credit is not eligible for annual indexing (ITA 117.1(2)). 118.06 Volunteer Firefighters Credit 15% of $3,000 for qualifying volunteers. Note that this credit is not eligible for annual indexing (ITA 117.1 (2)). There is a federal budget proposal that would increase the credit amount to $6,000 beginning in 2024. 118.07 Volunteer Search and Rescue Workers Credit 15% of $3,000 for qualifying volunteers. Note that this credit is not eligible for annual indexing (ITA 117.1(2)). There is a federal budget proposal that would increase the credit amount to $6,000 beginning in 2024. 118.1 Charitable Donations Credit—Regular The general limit on amounts for this credit is 75% of net income. There is an addition to this general limit equal to 25% of any taxable capital gains and 25% of any recapture resulting from a donation (e.g., a gift) of capital property. In addition, the income inclusion on capital gains arising from a gift of some publicly listed shares is reduced from one-half to nil (ITA 38(a.1)). For individuals, the credit is equal to: [{15%)(A)] ♦ [(33%)(B)] + [(29%)(C)] where: Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 2024 Rates, Credits, and Other Data xxv Information Applicable to Individuals A = The first $200 of eligible gifts. B = The lesser of: • total gifts, less $200; and • taxable income, less $246,752. C = The excess, if any, by which the individual's total gifts exceed the sum of $200 plus the amount determined in B. 118.2 Medical Expenses Credit The medical expense tax credit is determined by the following formula: [15%] [(B - C) + D], where: B is the total of an individual’s medical expenses plus medical expenses for a spouse or common-law partner, and any children who are less than 18 years of age at the end of the taxation year. C is the lesser of 3% of the individual's net income and $2,759. The threshold of $2,759 is the lesser amount when net income is $91,967 or higher. D is the total of all amounts each of which is, in respect of a dependant of the individual (other than a child of the individual who is less than 18 years of age at the end of the taxation year), an amount determined by the formula: E - F, where: E is the total of the dependant's medical expenses. F is the lesser of 3% of the dependant's net income and $2,759. 118.3 Disability Credit—All Ages 15% of $9,872. Part or all of this credit can be transferred to a person claiming the disabled individual as a dependant. 118.3 Disability Expenses Supplement —Under 18 and Qualifies for the Disability Tax Credit 15% of $5,758, reduced by the total of amounts paid for attendant care or supervision in excess of $3,373 that are deducted as child care expenses, deducted as a disability support amount, or claimed as a medical expense in calculating the medical expense credit. Note that the supplement is designed to add an additional amount to the disability tax credit. Education-Related Credits 118.5 • Tuition Fees, which Includes Examination and Ancillary Fees • 15% of qualifying tuition fees • 15% of examination fees for both post-secondary examinations and examinations required in a professional program • 15% of ancillary fees that are imposed by a post-secondary educational institution on all of their full- or part-time students. Up to $250 in such ancillary fees can be claimed even if not required of all students. The $250 limit is not subject to annual indexing (ITA 117.1(2)). 118.62 • Interest Credit on Student Loans 15% of interest paid on qualifying student loans. In the 2023 federal budget the govern ment announced a plan to permanently eliminate interest on Canada student loans. 118.9 • Transfer of Tuition Credit If the individual student cannot use the tuition credit, is not claimed as a dependant by a spouse or common-law partner, and does not transfer the unused credit to a spouse or common-law partner, then a parent or grandparent of the individual can claim up to $750 |(15%)($5,000)] of any unused tuition credit. The amount that can be transferred is reduced by the amount of the tuition credit required to reduce the student's federal income tax payable to nil. The annual $5,000 limit is not subject to annual indexing (ITA 1171(2)). Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 xxvi 2024 Rates, Credits, and Other Data Information Applicable to Individuals Employment Insurance Credit (El) 15% of amounts paid by employees up to the maximum El 118.7 premium of $1,049 (1.66% of insurable earnings to a maximum of $63,200). Canada Pension Plan Credit and Deduction (CPP) for Employees The maximum tax credit base 118.7 for all individuals is $3,218 [(4.95%)($68,500 maximum pensionable earnings - $3,500 exemption)]. The actual maximum CPP contributions for those individuals with pensionable earnings of $73,200 or more is $4,056 |(5.95%)($68,500 maximum pensionable earnings - a $3,500 exemption) + a second-tier contribution (introduced in 2024) equal to (4%)($73,200 - $68,500)]. The difference between the required annual CPP contribution and the amount eligible for a CPP credit is treated as a separate deduction from net income: If the maximum contribution of $4,056 is required, then the CPP net income deduction (ITA 60(e.1)) is equal to $838 [$4,056- the CPP credit amount of $3,218]. 118 7 122.51 Pension Credit and Deduction (CPP) for Self-Employed Individuals The maximum tax credit base for self-employed individuals is the same as that of employees, which is $3,218 [(4.95%)($68,500 maximum pensionable earnings -$3,500 exemption)]. The actual maximum CPP contributions for self-employed individuals with pensionable earnings of $73,200 or more is $8,112 [(2)(5.95%)($68,500 maximum pensionable earnings - $3,500 exemption + the second-tier contri bution for 2024 of (2)($73,200 - $68,500)(4%)|.The difference between the required CPP contribu tions and the CPP credit is treated as a separate net income deduction as a result of ITA 60(e.1). If the maximum CPP contributions are required, then the CPP net income deduction will be equal to $4,894 ($4,056 - $3,218). CPP contributions made as a result of employment require the employer to contribute the same amount as the employee (maximum $4,056). In a self-employment situa tion, the individual is required to make CPP contributions equal to the employee and employer CPP contributions, doubling the required CPP contributions, by the self-employed individual. Canada Medical Expense Supplement The individual claiming this amount must be 18 or over at the end of the taxation year and have earned income of at least $4,275. The amount is equal to the lesser of $1,464 and 25/15 of the medical expense tax credit. The refundable amount is then reduced by 5% of family net income in excess of $32,419. Not available when family income is more than $61,699. The medical expense supplement is designed to add an additional amount based on the medical expense credit, which is fully refundable. The refund able amount does not reduce the medical expense credit that would otherwise have been claimed. Refundable 122.9 Eligible Educator School Supply Credit A maximum of 25% of up to $1,000 of eligible expen ditures that are made by eligible educators. This credit is not subject to annual indexing (ITA 117.1 (2)). 122.91 Canada Training Credit The lesser of the training limit amount and 50% of eligible training costs incurred in the previous year. Minimum required working income must be $11,511 and maximum net income is $165,430 based on the previous taxation year's income tax rate for the second-high est federal income tax bracket. The credit adds $250 for each eligible year for individuals who are between 26 and 66 years of age. If an individual qualified for each year, then the 2024 training limit would be $1,250 |(5years)($250)]. 122.92 Multigenerational Home Renovation Tax Credit A maximum of 15% of $50,000 of qualifying expenditures that are the costs of renovating, altering, or adding to a housing unit in Canada for the purpose of creating a secondary unit that would enable either an individual 65 years of age or older or a disabled individual to live together within that home with family members. Qualifying expendi tures are those incurred on or after January 1, 2023. The credit can only be claimed in the taxation year in which the work is completed. This credit is not subject to annual indexing (ITA 117.2)). 127(3) Political Donations Credit Three-quarters of the first $400, one-half of the next $350, one-third of the next $525, to a maximum credit of $650 on donations of $1,275. This credit is not subject to annual indexing (ITA 117.1(2)). Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 2024 Rates, Credits, and Other Data xxvii Information Applicable to Individuals 127.4 Labour Sponsored Venture Capital Corporations (LSVCC) Credit The federal credit is equal to 15% of acquisitions of LSVCCs registered with a province or territory. This credit no longer applies to federally registered LSVCCs. ITA 82 and Dividend Gross-up and Dividend Tax Credit • Eligible Dividends These dividends are grossed up by 38% with a federal dividend tax credit ITA 121 of 6/11 of the gross up. Non-Eligible Dividends These dividends are grossed up by 15% with a federal dividend tax credit of 9/13 of the gross up. • Tax-Free Taxable Dividends An individual with no income can receive a fairly large amount of taxable dividends without having to pay any federal income tax as a result of a combination of the BPA and the dividend tax credit. The maximum amount that can be received tax free requires that the tax on split income (TOSI) not apply and that, in the case of a single individual, there is no other income and, in the case of a dependant (spouse, common-law partner, or individual qualifying for the eligible dependant credit), that the dependant does not have any income. The following amounts can be received without any federal income tax in 2024: • Taxable Dividend Single Individual Individual with Dependant Non-eligible Eligible $34,300 $71,700 $59,000 $92,100 Other Data for Individuals Part 1.2 Old Age Security (OAS) Clawback Limits The tax (clawback) on OAS benefits is based on the lesser of 100% of the OAS benefits received and 15% of the amount by which “threshold income" (net income calculated without the net income deduction for the OAS clawback) exceeds $90,997. OAS maximum benefits in 2024 are approximately $8,500 for individuals between the ages of 65 and 74, meaning that when net income reaches $147,664 all of the OAS would be clawed back. Maximum annual OAS payments for 2024 for individuals 75 years of age and older is approximately $9,400, meaning that all of the OAS would be clawed back when net income exceeds $153,664. Chapter 4 Employment Insurance (El) Clawback Limits The tax (clawback) on El benefits is determined under the El Act and applied to the ITA. The clawback is based on the lesser of 30% of the El ben efits received and 30% of the amount by which "threshold income" exceeds $79,000 (1.25 times the maximum insurable earnings of $63,200). For this purpose, "threshold income" is net income calculated without the net income deductions determined for both the OAS and El clawbacks. Chapter 9 Child Care Expenses The least of three amounts, none of which are subject to annual indexing: 1. 2. 3. The amount actually paid for child care services. If however the child is at a camp or boarding school, this amount is limited to a weekly amount of $275 (any age if eligible for the disability credit), $200 (under 7 year of age), or $125 (age 7 through 16 or over 16 with a mental or physical impairment where the impairment does not qualify for the disability credit) regardless of the actual amount paid. The sum of the annual child care expense amounts for eligible children.The perchild amounts are $11,000 (any age if eligible for the disability credit), $8,000 (under 7 year of age), or $5,000 (age 7 through 16 or over 16 with a mental or physical impairment where the impairment does not qualify for the disability credit). 2/3 of the individuals earned income (for child care expenses purposes). Chapter 10 RRSP Deduction Room For 2024, the addition to RRSP deduction room is equal to: • the lesser of $31,560 and 18% of 2023 earned income, • reduced by the 2023 pension adjustment (PA) and any 2024 past service pension adjust ment (PSPA), and • increased by any 2024 pension adjustment reversal (PAR). Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 xxviii 2024 Rates, Credits, and Other Data Information Applicable to Individuals and Corporations Chapter 11 Capital Gains Deduction For 2024, the deduction limit for dispositions of shares of qualified small business corporations (QSBC) shares and qualified farm and fishing property (QFP) is $1,016,836, which offsets $508,418 in taxable capital gains that have been calculated using the 50% inclusion rate. Since the indexed 2024 capital gains deduction now exceeds $1,000,000 there is no additional amount for QFP. Note that the 2024 federal budget proposed to increase the capital gains deduction limit to $1,250,000 beginning June 25, 2024. Provincial.Territorial Income Tax Rates and Provincial/Territorial Tax Credits for Individuals Provincial/Territorial income taxes are based on federal taxable income, with most provinces and territories adopting multiple income tax rates. The number of income tax rate brackets range from three brackets in Manitoba and Saskatchewan to eight brackets in Newfoundland and Labrador. Provincial and territorial tax credits are generally based on the minimum provincial/territorial rate applied to a credit base that is similar to that used for federal tax credits. In addition to regular income tax rates, two provinces, Ontario and Prince Edward Island (PEI), also include surtaxes. Information Applicable to Individuals and Corporations UR 4301 Prescribed Interest Rates The following table show the base interest rate that would be used in calculations such as imputed interest on loans. It also shows the interest rates charged on amounts owing from and to the CRA. The interest rates have been as follows: Year Quarter Base Rate Owing From* Owing To 2021 2022 2022 2022 2023 2023 2024 All I. II III IV I II, III, IV III 1% 1% 2% 3% 4% 5% 6% 3% 3% 4% 5% 6% 7% 8% 5% 5% 6% 7% 8% 9% 10% *The interest rate earned on refunds from CRA to corporations is limited to the base rate while the interest rate earned on refunds from CRA to individuals is as shown in the "Owing From" column. The ’Owing To" column represents the interest rate charged by the CRA on amounts owing to the CRA by taxpayers. Automobile Deduction Limits • For Class 10.1 passenger vehicles purchased, new or used, on or after January 1, 2024, the CCA base is limited to the first $37000 of the cost, plus the GST/HST & PST based on that same $37,000 amount. • For zero-emission passenger vehicles (ZEPV) purchased, new or used, on or after January 1, 2024, the CCA base is limited to the first $61,000 of the cost, plus the GST/HST & PST based on that same $61,000 amount, which is unchanged from 2023. • Interest on financing of automobiles is limited to $11.67 per day based on a $350 limit divided by 30 days. • Deductible leasing costs are limited to $1,050 per month for leases entered into on or after January 1, 2024. • Operating cost benefit = $0.33 per kilometre, which is unchanged from 2023. • Deductible rates = $0.70 for the first 5,000 kilometres, $0.64 for any additional kilometres. The rates are $0.74 and $0.68, respectively, per kilometre for each of the three territories). CCA Rates See Appendix to Chapter 5. Quick Method Rates (GST Only) Percentage on GST Included Sales _______________________________________ First $30,000__________ On Excess Retailers and Wholesalers Service Providers and Manufacturers 0.8% 2.6% Note Different rates apply in the provinces that participate in the HST. 1.8% 3.6% Get full Ebook on Email: tbworld2020@gmail.com Or on Website https://academicresourceshub.com/ Whatsapp https://wa.me/16154344133 2024 Rates, Credits, and Other Data xxix Information Applicable to Corporations Information Applicable to Corporations Federal Corporate Income Tax Rates are as follows (federal tax abatement removed): General Business Basic Corporate Income Tax Rate 38% General Business Federal Abatement on income earned in Canada (10%) General Business General Rate Reduction (GRR) (13%) General Business (After Abatement and GRR) 15% General Business Rate for Income Eligible for M&P Deduction 15% Income Eligible for Small Business Deduction (SBD) (38% -10% -19%) 9% Part IV Refundable Tax 38 1/3% Part I Additional Refundable Tax on Investment Income of a CCPC (ART) 10 2/3% Reference 89(1) General Rate Income Pool (GRIP) A CCPC's GRIP is defined as follows: • The GRIP balance at the end of the preceding taxation year; plus • 72% of the CCPC's taxable income after it has been reduced by amounts eligible for the SBD and aggregate investment income; plus • 100% of eligible dividends received in the year; plus • adjustments related to amalgamations and wind-ups; less • eligible dividends paid in the preceding taxation year. 125(1) Small Business Deduction (SBD) is equal to 19% of the least of: A. Net Canadian active business income. B. Taxable income, less: 1. 100/28 times the ITA 126(1) credit for income taxes paid on foreign non-business income, calculated without consideration of the ART under ITA 123.3 or the GRR under ITA 123.4; and 2. 4 times the ITA 126(2) credit for income taxes paid on foreign business income, calcu lated without consideration of the GRR under ITA 123.4. C. The annual business limit of $500,000, less any portion allocated to associated corporations, less the grinds for large corporations and passive income. 125(5.1) Small Business Deduction Grind Grind to the SBD for a taxation year is the greater of the following: (1) TCEC (Taxable Capital Employed in Canada) Grind = AxBr $90,000 A = The business limit for the year B = 0.00225 (TCEC for the previous year - $10,000,000); and (2) AAII (Adjusted Aggregate Investment Income) Grind = (D - $500,000) x 5 (E - $50,000) where D =The business limit for the year E = AAII for the preceding year If there are associated corporations, then the combined TCEC and AAII of all associated corpora tions for the previous year would be added. 123.3 Additional Refundable Tax on Investment Income (ART) is equal to 10 2/3% of the lesser of: • the corporation's "aggregate investment income" (All) for the year las defined in ITA 129(4)]; and • the amount, if any, by which the corporation's taxable income for the year exceeds the amount upon which the SBD is determined. 123.4(2) General Rate Reduction (GRR) is equal to 13% of full rate taxable income. This is taxable income reduced by the amount upon which the SBD is determined, income eligible for the M&P deduc tion, and the corporation's "aggregate investment income" (All) for the year.

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