Q: What is the formula for calculating the periodic limit for child care expenses?

$$\text{Periodic Limit} = \frac{\text{Annual Amount}}{40}$$

Question 1

Which of the following is NOT considered taxable under 'Other Sources of Income' according to ITA 56 to 59.1?

Accepted Answer

Lottery winnings

Question 2

A self-employed individual pays both the employer and employee portions of CPP. How are these amounts treated for tax purposes?

Accepted Answer

The employee portion qualifies for a tax credit; the employer portion is deductible in Other Deductions.

Question 3

Which of the following is a requirement for moving expenses to be deductible under ITA 62?

Accepted Answer

The new residence must be at least 40 km closer to the new work location than the old residence.

Question 4

Which of the following moving expenses is NOT deductible?

Accepted Answer

Pre-visit costs to the new location paid by the employer

Question 5

An employer reimburses an employee for a $25,000 loss on the sale of their old residence due to a work-related move. How much of this reimbursement is NOT a taxable benefit?

Accepted Answer

$17,500

Question 6

Child care expenses are deductible only if they allow the taxpayer to:

Accepted Answer

Go to work or school

Question 7

The deduction for child care expenses is limited to the least of the following EXCEPT:

Accepted Answer

The taxpayer's total annual income

Question 8

A higher income spouse can claim child care expenses when the lower income spouse is unavailable. What additional limit must be considered?

Accepted Answer

Periodic limit multiplied by the number of weeks or months the lower income spouse is unavailable

Question 9

What is the formula for calculating the periodic limit for child care expenses?

Accepted Answer

$$	ext{Periodic Limit} = \frac{	ext{Annual Amount}}{40}$$

Question 10

Which of the following statements about RRSP deductions is correct?

Accepted Answer

The maximum deduction is the lesser of the amount contributed plus undeducted contributions carried forward, and the RRSP deduction limit.

Question 11

If Employment Insurance (EI) or Old Age Security (OAS) benefits are clawed back, how is the amount repaid treated for tax purposes?

Accepted Answer

It is deductible from income.

Question 12

Which type of pension income is NOT eligible for pension splitting?

Accepted Answer

Canada Pension Plan benefits

Question 13

Which of the following is a requirement for a payment to be considered spousal support for tax purposes?

Accepted Answer

Payments must be periodic and made as part of a written agreement or tribunal order.

Question 14

In a non-arm's length transaction between related individuals, if the sale price is below fair market value, what values are used for tax purposes?

Accepted Answer

Seller uses fair market value for proceeds; purchaser uses the actual price for cost.

Question 15

Double taxation can occur in non-arm's length transactions between related individuals (excluding spouses) unless the property is:

Accepted Answer

Sold or gifted at fair market value

Question 16

What is the result of a spousal rollover for tax purposes?

Accepted Answer

The receiving spouse obtains the asset at the same tax values (ACB and UCC) as the transferring spouse.

Question 17

After a spousal rollover, who reports future property income and capital gains/losses from the transferred asset?

Accepted Answer

The transferor spouse

Question 18

If bonds are transferred from a mother to her minor son, who reports future interest income and who reports future capital gains/losses?

Accepted Answer

Mother reports interest income; son reports capital gains/losses.

Question 19

Which of the following is NOT attributed back to the transferor in income attribution rules?

Accepted Answer

Business income earned by the spouse or child

Question 20

To avoid income attribution when transferring property to a minor child, which of the following must occur?

Accepted Answer

The transfer must be a sale at fair market value and the transferor must receive FMV consideration (e.g., cash, assets, or a loan at prescribed interest rate).

Other Income, Other Deductions, and Related Issues (Canadian Taxation)

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