1. Many corporations carry on business in more than one province.
If a corporation from Province 1
wishes to conduct business in Province 2, the corporation will not make any provisional
allocation to Province 2 if
Multiple Choice
the parent corporation sets up a branch in Province 2.
the permanent establishment in Province 2 has a lower sales to wage ratio than the ratio in
Province 1.
a branch treaty exists between Province 1 and Province 2.
business is conducted in Province 2 by way of direct sales from Province 1.
1. Which of the following tax reductions would apply to all types of taxable income earned by a
Canadian controlled private corporation (CCPC) in Canada?
Multiple Choice
Federal tax abatement.
Manufacturing and processing deduction.
Small business deduction.
General rate reduction.
2. Which of the following sources of income would be subject to the highest initial
combined corporate tax rate?
Multiple Choice
Active business income of a Canadian controlled private corporation (CCPC) over $500,000.
Property income of a public corporation.
Active business income of a public corporation.
Property income of a CCPC.
4. Which of the following can be included as a Division C deduction during the year?
Multiple Choice
Dividends received from a taxable Canadian corporation by ABC Co. (a CCPC)
Dividends received from a taxable Canadian corporation by an individual
A donation made to a registered charity by an individual
A net-capital loss from the previous year by Small Inc. which earned only active business income
during the year
5. The net income for tax purposes of a corporation is determined by the
Multiple Choice
income statement.
income statement less income taxes.
income statement less income taxes and depreciation.
application of the section 3 schema.
6. In most cases, what would be the tax treatment of dividends received by one Canadian
corporation from another Canadian corporation?
Multiple Choice
Taxable as property income at the basic federal tax rate.
Added to net income and then subtracted when calculating taxable income.
Initially, subject to the regular tax rates which would be fully refundable when dividends were
paid to the shareholders.
Grossed-up by 15% or 38%, depending on the tax rate paid by the paying corporation, and added
to net income.
7. When there was an acquisition of control of one corporation by another corporation,
which of the following would be true?
Multiple Choice
The taxation year of the acquired corporation would be changed to the taxation year of the
acquiror.
If the adjusted cost base (ACB) of non-depreciable assets owned by the acquired corporation
were greater than the fair market value (FMV) of the assets, the difference would be deemed to be
a capital loss incurred prior to the date of the acquisition.
Any loss carry-forwards of the acquired corporation would expire.
A reasonable reserve for the accounts receivable would be determined prior to the date of the
acquisition.
8. Corporation A has a profit of $100,000, and Corporation B has a loss of $250,000. Both corporations
have the same shareholders. How might Corporation A get the use of Corporation B's losses?
Multiple Choice
Corporation A can transfer its profits to Corporation B.
The loss from Corporation B can be transferred to Corporation A.
Only $100,000 from Corporation B can be transferred to Corporation A.
Corporations B and A would have to merge to one company.
9. Which of the following statements would be true regarding utilizing losses in a group of
corporations under common control?
Multiple Choice
The corporations could file consolidated returns to utilize the losses.
The loss corporation would have to be legally merged with the profitable corporation(s), to form
only one corporation so that the losses could be used.
The income of the profitable corporation could be paid as a dividend to the loss corporation to
absorb the losses.
The losses would expire as soon as there were any merger of the loss and profitable companies.
10. Beetle Ltd. had the following accounts in Year 1: Revenue $100,000, COGS $65,000,
Salaries $45,000, Gain on Sale of Assets $20,000, Administrative Expenses $8,000.
Which of the following is correct?
Multiple Choice
Beetle Ltd. will have a non-capital loss carryforward of $0 at the end of the year.
Beetle Ltd. will have a non-capital loss carryforward of $4,000 at the end of the year.
Beetle Ltd. will have a non-capital loss carryforward of $8,000 at the end of the year.
Beetle Ltd. will have a non-capital loss carryforward of $18,000 at the end of the year.
11. W Co. had net income of $30,000 as per the income statement. It included $1,000 of
donations and $3,000 of dividends from a taxable Canadian corporation. What is W’s
taxable income?
Multiple Choice
$30,000
$26,000
$27,000
$29,000
12. Maple Co. is a new Canadian controlled private corporation with active business income
of $450,000 in its first year of operations. Capital gains recognized by the company
during the year totaled $30,000. How much is Maple Co.'s small business deduction for
the year? (The annual limit has not been reduced by any small business deduction
reductions.)
Multiple Choice
$85,500
$88,350
$91,200
$95,000
13. The Big Corp. is a Canadian controlled private corporation which realized a total net
income for tax purposes of $230,000 in Year 1. During the year, Big received $25,000 in
dividends from a taxable Canadian corporation, and Big also donated $15,000 to a
registered charity. What is Big's taxable income in Year 1?
Multiple Choice
$190,000
$205,000
$215,000
$240,000
14. In 2023, a Canadian controlled private corporation (CCPC) earned $550,000 of active
business income (ABI) in Canada, and $75,000 of interest income on long-term bond
investments. What would be its federal Part 1 tax payable?
Multiple Choice
$81,500
$78,500
$64,000
$49,750
15. Y Co. is a Canadian controlled private corporation with active business income of
$350,000 in Year 1. The company engages in retail and wholesale activities. Capital gains
recognized by the company in Year 1 totaled $84,000. Y Co. will utilize a net capital loss
carry-over of $28,000 on its Year 1 tax return. What is Y Co.'s net income for tax
purposes?
Multiple Choice
$350,000
$364,000
$392,000
$434,000
