Course-Level Assessment Project: Computation of Taxes Payable and Providing Tax Planning Advice to a Corporate Client

Transcription

1 Course Description This course builds on concepts learned in introductory financial accounting and microeconomics and in the study of the fundamentals of the Canadian Income Tax System with respect to corporations. In this course, students are introduced to the principles and practice of taxation and related tax planning for corporations and provided with a basic understanding of the Canadian Income Tax Act. Topics covered include the identification of sources of income and how they are taxed, the computation of net income, taxable income and taxes payable for corporations resident in Canada, and the impact of taxation on business decision-making for corporations. Student Audience: The predominant audience for this course is undergraduate accounting majors who are in a degree or diploma program. Accounting Majors typically take a sequence of courses beginning with Financial Accounting, followed by Intermediate Financial Accounting, Management Accounting, and then Taxation. Course-Level Assessment Project: Computation of Taxes Payable and Providing Tax Planning Advice to a Corporate Client Milestone(s): Milestone 4.1: Administrative Policies, Computation of GST/HST and Determining Residency Explain income tax administration rules for corporations Compute the liability for GST and HST Identify the underlying principles of the income tax system in Canada Milestone 7.1: Computation of Net Income for a Corporation Compute net income for a corporation taxpayer resident in Canada, determined per Section 3 of the ITA Compute Capital Cost Allowance (CCA) deductions Use the ITA to determine an corporation's net income and deductions from various sources Milestone 10.1: Computation of Taxable Income & Taxes Payable for a Corporation Compute taxable income and Federal taxes payable for a corporation Use the ITA to determine tax implications of associated corporations Use the ITA to determine tax implications of affiliated and/or related taxpayers Use the ITA to determine refundable taxes for a corporation Milestone 12.1: Tax Planning Advice and Corporate Reorganizations Apply the principles of income taxation to tax planning decisions for corporations Explain the mechanics of corporate reorganizations Page 1 of 34

2 Lesson 1: Tax Administration Outcomes: Explain income tax administration rules for corporations Presented: Topic 1: Administrative Rules Describe the filing requirements for corporations Describe the interest and penalties applicable for corporations Compute tax instalments for corporations Describe the assessment process for corporations Describe the appeal process for corporations Topic 2: Tax Planning, Tax Avoidance and Tax Evasion Describe tax planning, tax avoidance and tax evasion Describe the general anti-avoidance rule as per section 245 of the ITA Assessed: Assignment 1.1: Tax Theory Describe the filing requirements for corporations Describe the interest and penalties applicable for corporations Compute tax instalments for corporations Describe the assessment process for corporations Describe the appeal process for corporations Describe tax planning, tax avoidance and tax evasion Describe the general anti-avoidance rule as per section 245 of the ITA Discussion 1.1: Introductions Discussion 1.2: GAAR in Court Describe the general anti-avoidance rule as per section 245 of the ITA Quiz 1: Quiz 1.1 Describe the filing requirements for corporations Describe the interest and penalties applicable for corporations Compute tax instalments for corporations Describe the assessment process for corporations Describe the appeal process for corporations Describe tax planning, tax avoidance and tax evasion Page 2 of 34

3 Describe the general anti-avoidance rule as per section 245 of the ITA Supplemental Assignment 1.1: The Theory of Tax Describe the filing requirements for corporations Describe the interest and penalties applicable for corporations Compute tax instalments for corporations Describe the assessment process for corporations Describe the appeal process for corporations Describe tax planning, tax avoidance and tax evasion Describe the general anti-avoidance rule as per section 245 of the ITA Reading: Byrd & Chen's Canadian Tax Principles, Edition Chapter 2, "Procedures and Administration" Assessment Notes: Assignment 1.1: Theory questions related to administrative rules for corporations Supplemental Assignment 1.1: Alternative theory questions related to administrative rules for corporations Discussion 1.1: Introductions Discussion 1.2: GAAR in Court Readings: Byrd & Chen Edition Chapter 2 sections, "Returns and Payments Corporations" (2-60 to 2-79), "Books and Records", "Assessments and The CRA My Account Service", "Refunds", "Adjustments to Income Tax Returns", "Disputes and Appeals", "Tax Evasion, Avoidance and Planning", "Collection and Enforcement" and "Taxpayer Relief Provisions" (2-85 to Notes: Updates: required for changes in interest and penalty rates, linked to updated document CPA competencies: Assesses a corporate entity's general tax issues o General Concepts and Principles of Taxation (b) General anti-avoidance rule (C) Advises taxpayers with respect to assessment, notice of objection, and appeals o General Concepts and Principles of Taxation (c) Filing deadlines and requirements (B) (d) Notice of assessments and appeal process (C) Page 3 of 34

4 (e) Objectives to assessments and appeal process (C) Page 4 of 34

5 Lesson 2: GST/HST Outcomes: Compute the liability for GST and HST Presented: Topic 1: Tax Credits Define taxable supplies for GST/HST purposes Describe the administrative rules related to GST/HST Describe the GST/HST collection and remittance process Topic 2: Computing Tax Credits Define zero rated supplies for GST/HST purposes Define exempt supplies for GST/HST purposes Define input tax credits (ITC s) Compute the liability for GST/HST Assessed: Assignment 2.1: GST/HST Calculations Compute the liability for GST/HST Discussion 2.1: GST implications Define zero rated supplies for GST/HST purposes Define exempt supplies for GST/HST purposes Define input tax credits (ITC s) Compute the liability for GST/HST Quiz 2: Quiz 2.1 Define taxable supplies for GST/HST purposes Describe the administrative rules related to GST/HST Describe the GST/HST collection and remittance process Define zero rated supplies for GST/HST purposes Define exempt supplies for GST/HST purposes Define input tax credits (ITC s) Compute the liability for GST/HST Supplemental Assignment 2.1: Caluclating GST/HST Page 5 of 34

6 Compute the liability for GST/HST Reading: Byrd & Chen's Canadian Tax Principles, Edition Chapter 21, "Goods and Services Tax" Assessment Notes: Assignment 2.1: Compute the liability for GST/HST for a business in several scenarios Supplemental Assignment 2.1: Compute the liability for GST/HST for a business in several scenarios Discussion 2.1: Determine GST implications for income tax purposes with examples Readings: Byrd & Chen edition Chapter 21, entire chapter Notes: Updates: Occasional Changes (GST) CPA competencies: Assesses a corporate entity's general tax issues o General Concepts and Principles of Taxation (i) Other types of taxation (HST/GST, etc.) (B) o GST/HST (a) Liability for tax (B) (b) Input tax credits (B) (c) Registration (B) (d) Collection and remittance (B) Page 6 of 34

7 Lesson 3: The Canadian Tax System and Structure of the Income Tax Act Outcomes: Identify the underlying principles of the income tax system in Canada Presented: Topic 1: Tax Systems Describe how each of the fundamentals are incorporated in the income tax system in Canada Describe the underlying objectives of the income tax system in Canada Describe the role and functions of Federal government departments in the income tax system Topic 2: The Income Tax Act (ITA) Describe the structure of the Income Tax Act (ITA) Identify the sections of the ITA that apply to each source of income Interpret the purpose of sections of the ITA legislation Describe other information sources beyond the ITA Assessed: Assignment 3.1: The ITA Describe how each of the fundamentals are incorporated in the income tax system in Canada Describe the underlying objectives of the income tax system in Canada Describe the role and functions of Federal government departments in the income tax system Describe the structure of the Income Tax Act (ITA) Identify the sections of the ITA that apply to each source of income Interpret the purpose of sections of the ITA legislation Describe other information sources beyond the ITA Assignment 3.2: Federal Government Departments Describe the role and functions of Federal government departments in the income tax system Discussion 3.1: Tax Policy Describe how each of the fundamentals are incorporated in the income tax system in Canada Describe the underlying objectives of the income tax system in Canada Quiz 3: Quiz 3.1 Page 7 of 34

8 Describe how each of the fundamentals are incorporated in the income tax system in Canada Describe the underlying objectives of the income tax system in Canada Describe the role and functions of Federal government departments in the income tax system Describe the structure of the Income Tax Act (ITA) Identify the sections of the ITA that apply to each source of income Interpret the purpose of sections of the ITA legislation Describe other information sources beyond the ITA Supplemental Assignment 3.1: The Income Tax Act Describe how each of the fundamentals are incorporated in the income tax system in Canada Describe the underlying objectives of the income tax system in Canada Describe the role and functions of Federal government departments in the income tax system Describe the structure of the Income Tax Act (ITA) Identify the sections of the ITA that apply to each source of income Interpret the purpose of sections of the ITA legislation Describe other information sources beyond the ITA Reading: Byrd & Chen's Canadian Tax Principles, Edition Chapter 1, "Introduction to Federal Taxation in Canada" Assessment Notes: Readings: Chapter 1, Sections 1-1 to 1-76 Discussion 2.1: Tax policy what are the underlying objectives of the income tax system in Canada? Are some policies emphasized more than others? How does the debate over progressive vs. flat tax rates fit in with Canada's overall objectives for the income tax system in Canada? Assignment 2.1: Worksheet: Theory questions, including questions related to interpreting certain terminology in the ITA and describing the basic structure of the ITA Assignment 2.2: Compare the role and functions of the Department of Finance, the Department of Justice and Canada Revenue Agency Supplemental Assignment 2.1: Worksheet: Alternative theory questions, including questions related to interpreting certain terminology in the ITA and describing the basic structure of the ITA Possible Activity: Mark the ITA (Can students annotate a PDF document without special software?) Page 8 of 34

9 Notes: This lesson will be identical to Lesson 2 in Tax 1 Updates: None CPA competencies: Assesses a corporate entity's general tax issues o General Concepts and Principles of Taxation (a) Structure and interpretation of ITA (C) Page 9 of 34

10 Lesson 4: Net income Outcomes: Compute net income for a corporation taxpayer resident in Canada, determined per Section 3 of the ITA Presented: Topic 1: Liability for Income Tax Interpret the Charging Provision Topic 2: Canadian Residency Requirements Describe the sources of income for a corporation resident in Canada Apply the deemed and common-law resident definitions to corporations Recognize corporations that are non-residents Topic 3: Section 3 of the ITA Apply the format of section 3 of the ITA to the computation of net income for a corporation resident in Canada Describe the definition of resident Define a Canadian Controlled Private Corporation (CCPC) Assessed: Assignment 4.1: S.3 of the ITA Apply the format of section 3 of the ITA to the computation of net income for a corporation resident in Canada Assignment 4.2: Resident Case Studies Describe the definition of resident Apply the deemed and common-law resident definitions to corporations Recognize corporations that are non-residents Discussion 4.1: Common-law Residence Describe the definition of resident Apply the deemed and common-law resident definitions to corporations Recognize corporations that are non-residents Page 10 of 34

11 Quiz 4: Quiz 4.1 Interpret the Charging Provision Describe the definition of resident Apply the deemed and common-law resident definitions to corporations Recognize corporations that are non-residents Apply the format of section 3 of the ITA to the computation of net income for a corporation resident in Canada Describe the sources of income for a corporation resident in Canada Define a Canadian Controlled Private Corporation (CCPC) Supplemental Assignment 4.1: Section 3 of the ITA Apply the format of section 3 of the ITA to the computation of net income for a corporation resident in Canada Reading: Byrd & Chen's Canadian Tax Principles, Edition Chapter 1, "Introduction to Federal Taxation in Canada" Chapter 20, "International Issues in Taxation" Course-Level Assessment Milestone 4.1: Administrative Policies, Computation of GST/HST and Determining Residency Explain income tax administration rules for corporations Compute the liability for GST and HST Identify the underlying principles of the income tax system in Canada Assessment Notes: Assignment 4.1: Several independent case studies calculating net income according to S.3 of the ITA Assignment 4.2: Several independent resident case studies Supplemental Assignment 4.1: Several independent case studies calculating net income according to S.3 of the ITA Discussion 4.1: Analysis of court cases to determine how the Canadian courts have interpreted "common-law residence" and the court precedent established. Page 11 of 34

12 Readings: Byrd & Chen's Canadian Tax Principles, Edition Chapter 1: Sections 1-77 to 1-90 (Topic 2) Chapter 1: Sections 1-91 to (Topic 3) Chapter 20: Sections 20-1 to 20-5 and Sections to (Topic 2) Notes: This module has components that are similar to Module 3 in Taxation 1 Updates: None CPA Competencies: 6.1.1Assesses a corporate entity's general tax issues o General Concepts and Principles of Taxation (g) Concept of residency, deemed resident and common law resident (N/A) Analyzes tax consequences for non-residents o Existence of tax conventions and treaties (C) Determines taxes payable for a corporation in routine situations o Sources and Computation of Taxation Income o Computation of Taxes Payable (a) Tax Payable for a corporation (B) Page 12 of 34

13 Lesson 5: Capital Cost Allowance Outcomes: Compute Capital Cost Allowance (CCA) deductions Presented: Topic 1: Capital Cost Allowance Theory Describe the fundamentals of the Capital Cost Allowance (CCA) system in Canada Topic 2: Computation of CCA Deductions and UCC Balances Compute the CCA deduction and UCC Balances Topic 3: Cumulative Eligible Capital (CEC) Theory Describe the fundamentals of the Cumulative Eligible Capital (CEC) system in Canada Topic 4: Computation of CEC Amounts and Balances Compute the CEC amount and closing balance of the CEC account Assessed: Assignment 5.1: Calculating CCA and CEC Compute the CCA deduction and UCC Balances Compute the CEC amount and closing balance of the CEC account Discussion 5.1: Stimulating the Economy with Tax Policies Describe the fundamentals of the Capital Cost Allowance (CCA) system in Canada Quiz 5: Quiz 5.1 Describe the fundamentals of the Capital Cost Allowance (CCA) system in Canada Compute the CCA deduction and UCC Balances Describe the fundamentals of the Cumulative Eligible Capital (CEC) system in Canada Compute the CEC amount and closing balance of the CEC account Page 13 of 34

14 Supplemental Assignment 5.1: CCA and CEC Calculations Compute the CCA deduction and UCC Balances Compute the CEC amount and closing balance of the CEC account Reading: Byrd & Chen's Canadian Tax Principles, Edition Chapter 5, "Capital Cost Allowances and Cumulative Eligible Capital" Assessment Notes: Assignment 5.1: Case study with multiple calculations of CCA and CEC Supplemental Assignment 5.1: Alternate case study with different fact pattern and numbers Discussion 5.1: Use of tax policy to stimulate certain industries or economy (Class 29 vs 43, Class 45 vs. 50 vs. 52) Readings: Byrd & Chen, Edition Chapter 5 (entire chapter) Notes: This lesson will be identical to Lesson 5 in Tax 1 Updates: Occasional Changes Additional Notes: CEC may be going away in Double-check before course release. CPA Competencies: Assesses a corporate tax entity's general tax issues Determines income taxes payable for a corporation in routine situations o (b) Capital Cost Allowance (CCA): general principles and definitions (undepreciated capital cost, recaptured capital cost allowance, terminal loss, acquisitions and disposition of depreciable property, capital cost allowances classes) (B) Special rules (change in use, non-arm's length, luxury passenger vehicle, deemed capital cost inducement, disposition of building and land, available for use, short taxation year, loss on certain transfers, consideration FMV rules) (C) o (c) Cumulative Eligible Capital (CEC): general rules, calculation of CEC, acquisition and disposition of eligible capital property (B) Page 14 of 34

15 Lesson 6: Business Income Outcomes: Use the ITA to determine an corporation's net income and deductions from various sources Use the ITA to determine tax implications of associated corporations Presented: Topic 1: Business Income Theory Distinguish between active and passive sources of income Topic 2: Calculation of Net Business Income for a Corporation Apply provisions from Section 12, 18, 19, 20, and 67 of the Income Tax Act to compute net business income for a corporation Topic 3: Tax Planning Recognize tax planning opportunities related to business income for a corporation Assessed: Assignment 6.1: Calculation of Net Business Income Apply provisions from Section 12, 18, 19, 20, and 67 of the Income Tax Act to compute net business income for a corporation Assignment 6.2: Reasonable Expectation of Profit Distinguish between active and passive sources of income Discussion 6.1: Passive or Active? Distinguish between active and passive sources of income Quiz 6: Quiz 6.1 Distinguish between active and passive sources of income Apply provisions from Section 12, 18, 19, 20, and 67 of the Income Tax Act to compute net business income for a corporation Recognize tax planning opportunities related to business income for a corporation Page 15 of 34

16 Supplemental Assignment 6.1: Net Business Income Calculations Apply provisions from Section 12, 18, 19, 20, and 67 of the Income Tax Act to compute net business income for a corporation Reading: Byrd & Chen's Canadian Tax Principles, Edition Chapter 6, "Income or Loss from a Business" Assessment Notes: Assignment 6.1: Computation of net business income for a corporation Assignment 6.2: Discussion of reasonable expectation of profit (REOP) draft legislation and review court cases Supplemental Assignment 6.1: Alternate computation of net business income for a corporation Discussion 6.1: Distinguish between passive (property) and active (business) income, discuss scenarios Readings: Byrd & Chen's Canadian Tax Principles, Edition Chapter 6, "Income or Loss from a Business", entire chapter Notes: Updates: Annual updates required for deductible automobile allowance rates (linked document) CPA Competencies: Determines income taxes payable for a corporation in routine situations o (a) Sources and types of income: Business or Property Income: types of income (active business income, property income, interest income, dividend income, rental properties, capital gain/loss), basic rules and principles, inclusions, deductions limitations) (B) Page 16 of 34

17 Lesson 7: Investment Income for Corporations Outcomes: Use the ITA to determine an corporation's net income and deductions from various sources Presented: Topic 1: Property Income Distinguish between property income and business income Apply the provisions of Section 9 to 37 and Section 67 of the ITA to compute net property income for a corporation Apply the provisions of Sections 9 to 37 to calculate foreign investment income earned by a corporation resident in Canada Identify tax planning opportunities related to property income Topic 2: Capital Gains and Losses Identify the criteria to distinguish between capital gains and business income Apply sections 38 to 55 of the ITA to compute taxable capital gains and allowable capital losses Apply the provisions of subsection 13(21.1) for dispositions of real property Describe the replacement property provisions of subsection 13(4) and 44(1) Identify tax planning issues related to taxable capital gains and allowable capital losses Assessed: Assignment 7.1: Calculating Net Investment Income for a Corporation Apply the provisions of Section 9 to 37 and Section 67 of the ITA to compute net property income for a corporation Apply the provisions of Sections 9 to 37 to calculate foreign investment income earned by a corporation resident in Canada Identify the criteria to distinguish between capital gains and business income Apply sections 38 to 55 of the ITA to compute taxable capital gains and allowable capital losses Discussion 7.1: Net Investment Income Apply the provisions of Section 9 to 37 and Section 67 of the ITA to compute net property income for a corporation Apply the provisions of Sections 9 to 37 to calculate foreign investment income earned by a corporation resident in Canada Identify the criteria to distinguish between capital gains and business income Apply sections 38 to 55 of the ITA to compute taxable capital gains and allowable capital losses Page 17 of 34

18 Quiz 7: Quiz 7.1 Distinguish between property income and business income Apply the provisions of Section 9 to 37 and Section 67 of the ITA to compute net property income for a corporation Apply the provisions of Sections 9 to 37 to calculate foreign investment income earned by a corporation resident in Canada Identify tax planning opportunities related to property income Identify the criteria to distinguish between capital gains and business income Apply sections 38 to 55 of the ITA to compute taxable capital gains and allowable capital losses Apply the provisions of subsection 13(21.1) for dispositions of real property Describe the replacement property provisions of subsection 13(4) and 44(1) Identify tax planning issues related to taxable capital gains and allowable capital losses Supplemental Assignment 7.1: A Corporation's Net Investment Income Apply the provisions of Section 9 to 37 and Section 67 of the ITA to compute net property income for a corporation Apply the provisions of Sections 9 to 37 to calculate foreign investment income earned by a corporation resident in Canada Identify the criteria to distinguish between capital gains and business income Apply sections 38 to 55 of the ITA to compute taxable capital gains and allowable capital losses Reading: Byrd & Chen's Canadian Tax Principles, Edition Chapter 7, "Income from Property" Chapter 8, "Capital Gains and Capital Losses" Course-Level Assessment Milestone 7.1: Computation of Net Income for a Corporation Compute net income for a corporation taxpayer resident in Canada, determined per Section 3 of the ITA Compute Capital Cost Allowance (CCA) deductions Use the ITA to determine an corporation's net income and deductions from various sources Assessment Notes: Assignment 7.1: Calculate net investment income for a corporation Supplemental Assignment 7.1: Calculate net investment income for a corporation Page 18 of 34

19 Discussion 7.1: Discuss calculations of net investment income for a corporation Readings: Chapter 7 (excluding the sections: "Individuals Modified Accrual Method", "Income Trusts")) Chapter 8, except sections: Provisions for Special Assets Principal Residence Personal Use Property Listed Personal Property Gains and Losses on Foreign Currency Notes: Updates: None CPA competencies: Assesses a corporate tax entity's general tax issues o Sources and Computation of Taxable Income (a) Sources and types of income: Business or property income basic rules and principles, inclusions, deductions - limitations (B) Determines income taxes payable for a corporation in routine situations o Sources and Computation of Taxable Income (b) Capital cost allowance (CCA) Exchanges of property replacement (C) Disposition of a building and land (C) (d) Taxable capital gains and allowable capital losses: General rules, definitions and computation (B) Identical property rule (B) Proceeds of disposition - allocation (B) Inadequate consideration, gifting (B) Business investment loss (B) Capital gains reserves (B) Small business share rollover (B) Special rules (B) Dispositions to affiliated persons (C) Options and convertible property (B) Adjusted cost base - inclusions and deductions (B) Page 19 of 34

20 Lesson 8: Taxable Income and Part I Taxes Payable Outcomes: Compute taxable income and Federal taxes payable for a corporation Presented: Topic 1: Calculation of Taxable Income for a Corporation Apply Sections 110.1, 111, and 112 of the ITA to compute taxable income for a corporation Describe how taxable income is allocated, for purposes of calculating provincial income taxes for a corporation with business operations across provinces Topic 2: Calculation of Part 1 Taxes Payable for a Corporation Apply Section 123, 124, and 125 to compute Federal tax payable Describe the conditions required for a Canadian Controlled Private Corporation (CCPC) to be eligible for the Small Business Deduction, the Manufacturing and Processing Profits Deduction and the General Rate Reduction Define Specified Investment Income Define different types of corporations for tax purposes Apply Section 126 of the ITA to compute the Foreign Tax Credit Topic 3: Tax Planning Recognize tax planning opportunities related to deductions in the computation of taxable income Recognize tax planning opportunities related to the computation of Part I tax payable Assessed: Assignment 8.1: Calculating Taxable Income and Taxes Payable Apply Sections 110.1, 111, and 112 of the ITA to compute taxable income for a corporation Describe how taxable income is allocated, for purposes of calculating provincial income taxes for a corporation with business operations across provinces Apply Section 123, 124, and 125 to compute Federal tax payable Describe the conditions required for a Canadian Controlled Private Corporation (CCPC) to be eligible for the Small Business Deduction, the Manufacturing and Processing Profits Deduction and the General Rate Reduction Define Specified Investment Income Define different types of corporations for tax purposes Apply Section 126 of the ITA to compute the Foreign Tax Credit Recognize tax planning opportunities related to deductions in the computation of taxable income Recognize tax planning opportunities related to the computation of Part I tax payable Page 20 of 34

21 Discussion 8.1: Claiming Deductions Describe the conditions required for a Canadian Controlled Private Corporation (CCPC) to be eligible for the Small Business Deduction, the Manufacturing and Processing Profits Deduction and the General Rate Reduction Quiz 8: Quiz 8.1 Apply Sections 110.1, 111, and 112 of the ITA to compute taxable income for a corporation Describe how taxable income is allocated, for purposes of calculating provincial income taxes for a corporation with business operations across provinces Apply Section 123, 124, and 125 to compute Federal tax payable Describe the conditions required for a Canadian Controlled Private Corporation (CCPC) to be eligible for the Small Business Deduction, the Manufacturing and Processing Profits Deduction and the General Rate Reduction Define Specified Investment Income Define different types of corporations for tax purposes Apply Section 126 of the ITA to compute the Foreign Tax Credit Recognize tax planning opportunities related to deductions in the computation of taxable income Recognize tax planning opportunities related to the computation of Part I tax payable Supplemental Assignment 8.1: Taxable Income and Taxes Payable Apply Sections 110.1, 111, and 112 of the ITA to compute taxable income for a corporation Describe how taxable income is allocated, for purposes of calculating provincial income taxes for a corporation with business operations across provinces Apply Section 123, 124, and 125 to compute Federal tax payable Describe the conditions required for a Canadian Controlled Private Corporation (CCPC) to be eligible for the Small Business Deduction, the Manufacturing and Processing Profits Deduction and the General Rate Reduction Define Specified Investment Income Define different types of corporations for tax purposes Apply Section 126 of the ITA to compute the Foreign Tax Credit Recognize tax planning opportunities related to deductions in the computation of taxable income Recognize tax planning opportunities related to the computation of Part I tax payable Reading: Byrd & Chen's Canadian Tax Principles, Edition Chapter 11, "Taxable Income and Tax Payable for Individuals Revisited" Chapter 12, "Taxable Income and Tax Payable for Corporations" Assessment Notes: Page 21 of 34

22 Assignment 8.1: Comprehensive question calculating taxable income and taxes payable for a corporation Supplemental Assignment 8.1: Comprehensive question calculating taxable income and taxes payable for a corporation Discussion 8.1: Distinguish the requirements, and the related tax implications, for a CCPC to claim the General Rate Reduction, the Small Business Deduction and the Manufacturing and Processing Profits Deduction. Readings: Byrd & Chen's Canadian Tax Principles, Edition Chapter 12 (entire chapter) Chapter 11 only section called "Foreign Tax Credits Revisited" Notes: Updates: No regular updates CPA Competencies: Assesses a corporate entity's general tax issues o Stakeholder Relationships (d) Personal service business (B) Determines taxes payable for a corporation in routine situations o Computation of Taxes Payable (a) Tax Payable for a corporation: including small business deduction, general tax reduction (B) (c) Computation of taxable income deductions (e.g. donations, loss carry-overs, dividends, etc.) (B) Rules applicable to all taxpayers (foreign tax credit) (B) Page 22 of 34

23 Lesson 9: Associated Corporations and Related Party Transactions Outcomes: Use the ITA to determine tax implications of associated corporations Use the ITA to determine tax implications of affiliated and/or related taxpayers Presented: Topic 1: Related and Affiliated Persons Apply Section 251 of the ITA to determine if taxpayers are related Apply Section of the ITA to determine if taxpayers are affiliated Describe the tax consequences on transfers of property between affiliated persons Apply section 69 of the ITA to compute the tax consequences on non-arm s length transfers of property Topic 2: Associated Corporations Apply Section 256 of the ITA to determine if two corporations are associated Describe the tax consequences if two corporations are associated Topic 3: Tax Planning Describe tax planning opportunities related to associated corporations Assessed: Assignment 9.1: Determine a Relationship Apply Section 251 of the ITA to determine if taxpayers are related Apply Section of the ITA to determine if taxpayers are affiliated Describe the tax consequences on transfers of property between affiliated persons Apply section 69 of the ITA to compute the tax consequences on non-arm s length transfers of property Apply Section 256 of the ITA to determine if two corporations are associated Describe the tax consequences if two corporations are associated Describe tax planning opportunities related to associated corporations Discussion 9.1: Corporations: Related, Affiliated or Associated Apply Section 256 of the ITA to determine if two corporations are associated Describe the tax consequences if two corporations are associated Quiz 9: Quiz 9.1 Page 23 of 34

24 Apply Section 251 of the ITA to determine if taxpayers are related Apply Section of the ITA to determine if taxpayers are affiliated Describe the tax consequences on transfers of property between affiliated persons Apply section 69 of the ITA to compute the tax consequences on non-arm s length transfers of property Apply Section 256 of the ITA to determine if two corporations are associated Describe the tax consequences if two corporations are associated Describe tax planning opportunities related to associated corporations Supplemental Assignment 9.1: Corporate Relationships Apply Section 251 of the ITA to determine if taxpayers are related Apply Section of the ITA to determine if taxpayers are affiliated Describe the tax consequences on transfers of property between affiliated persons Apply section 69 of the ITA to compute the tax consequences on non-arm s length transfers of property Apply Section 256 of the ITA to determine if two corporations are associated Describe the tax consequences if two corporations are associated Describe tax planning opportunities related to associated corporations Reading: Byrd & Chen's Canadian Tax Principles, Edition Chapter 14, "Other Issues in Corporate Taxation" Chapter 16, "Rollovers under Section 85" Assessment Notes: Assignment 9.1: Determine if two corporations are related, affiliated and/or associated and describe the tax consequences. Two or more comprehensive cases. Supplemental Assignment 9.1: Determine if two corporations are related, affiliated and/or associated and describe the tax consequences. Two or more comprehensive cases. Discussion 9.1: Discussion Questions Reading: Byrd & Chen's Canadian Tax Principles, Edition Chapter 14, Section "Associated Companies" to Chapter 16. Sections "Affiliated Persons" to Notes: Updates: Annual - RRSP Dollar Limit (linked document) CPA Competencies: Page 24 of 34

25 6.1.1 Assesses a corporate entity's general tax issues o Stakeholder Relationships (a) Non-arm's length and related persons (B) (b) Associated or connected corporations (B) (c) Affiliated persons (B) Page 25 of 34

26 Lesson 10: Taxation of Investment Income Outcomes: Use the ITA to determine refundable taxes for a corporation Presented: Topic 1: Taxation of Investment Income Theory Describe the General Rate Income Pool (GRIP) and Low Rate Income Pool (LRIP) for a corporation Describe how integration affects the taxation of investment income for corporations in Canada Topic 2: Calculation of Taxes Payable on Investment Income for a CCPC Apply subsection of the Income Tax Act to calculate additional refundable tax on investment income (ART) Apply subsection 129(3) of the Income Tax Act to calculate the refundable dividend tax on hand (RDTOH) balance Apply subsection 129(1) of the Income Tax Act to calculate the dividend refund Topic 3: Tax Planning Recognize the tax planning opportunities related to refundable taxes Assessed: Assignment 10.1: Calculating Taxes Payable on Investment Income Describe the General Rate Income Pool (GRIP) and Low Rate Income Pool (LRIP) for a corporation Describe how integration affects the taxation of investment income for corporations in Canada Apply subsection of the Income Tax Act to calculate additional refundable tax on investment income (ART) Apply subsection 129(3) of the Income Tax Act to calculate the refundable dividend tax on hand (RDTOH) balance Apply subsection 129(1) of the Income Tax Act to calculate the dividend refund Recognize the tax planning opportunities related to refundable taxes Discussion 10.1: Integration Describe how integration affects the taxation of investment income for corporations in Canada Quiz 10: Quiz 10.1 Page 26 of 34

27 Describe the General Rate Income Pool (GRIP) and Low Rate Income Pool (LRIP) for a corporation Describe how integration affects the taxation of investment income for corporations in Canada Apply subsection of the Income Tax Act to calculate additional refundable tax on investment income (ART) Apply subsection 129(3) of the Income Tax Act to calculate the refundable dividend tax on hand (RDTOH) balance Apply subsection 129(1) of the Income Tax Act to calculate the dividend refund Recognize the tax planning opportunities related to refundable taxes Supplemental Assignment 10.1: Investment Income - Calculating Taxes Payable Describe the General Rate Income Pool (GRIP) and Low Rate Income Pool (LRIP) for a corporation Describe how integration affects the taxation of investment income for corporations in Canada Apply subsection of the Income Tax Act to calculate additional refundable tax on investment income (ART) Apply subsection 129(3) of the Income Tax Act to calculate the refundable dividend tax on hand (RDTOH) balance Apply subsection 129(1) of the Income Tax Act to calculate the dividend refund Recognize the tax planning opportunities related to refundable taxes Reading: Byrd & Chen's Canadian Tax Principles, Edition Chapter 13, "Taxation of Corporate Investment Income" Course-Level Assessment Milestone 10.1: Computation of Taxable Income & Taxes Payable for a Corporation Compute taxable income and Federal taxes payable for a corporation Use the ITA to determine tax implications of associated corporations Use the ITA to determine tax implications of affiliated and/or related taxpayers Use the ITA to determine refundable taxes for a corporation Assessment Notes: Assignment 10.1: A comprehensive calculation of Taxes Payable on Investment Income for a corporation Supplemental Assignment 10.1: A comprehensive calculation of Taxes Payable on Investment Income for a corporation (Alternate) Discussion 10.1: Page 27 of 34

28 Discussion on theory of integration. How integration is achieved through taxation of investment income Reading: Byrd & Chen's Canadian Tax Principles, Edition Chapter 13, entire chapter Notes: Updates: Occasional updates required for tax rates CPA Competencies: Assesses a corporate entity's general tax issues o General Concepts and Principles of Taxation (j) Integration under ITA (C) Determines income taxes payable for a corporation in routine situations Determines income taxes payable for a corporation in non-routine situations o Computation of Taxes Payable (a) Tax payable for a corporation (B) Including RDTOH, refundable Part I tax and Part IV tax Page 28 of 34

29 Lesson 11: Tax Planning for Corporations and Other Corporate Tax Issues Outcomes: Apply the principles of income taxation to tax planning decisions for corporations Presented: Topic 1: Benefits of Incorporation Describe the benefits of incorporation Identify the legal structures for a business Describe tax planning opportunities related to the Active Business Income of a Canadiancontrolled private corporation (CCPC) Topic 2: Owner-Manager Remuneration Describe the tax consequences of various types of remuneration for an owner-manager of a Canadian-controlled private corporation (CCPC) Topic 3: Shareholder Benefits Apply section 15 of the ITA compute shareholder benefits Describe the tax implications of section 15 on shareholder transactions Topic 4: Capital Dividend Account Apply section 83 of the ITA to compute the balance in the Capital Dividend Account Describe the tax implications of the Capital Dividend Account Assessed: Assignment 11.1: Tax Planning for Corporations Describe the benefits of incorporation Identify the legal structures for a business Describe tax planning opportunities related to the Active Business Income of a Canadiancontrolled private corporation (CCPC) Describe the tax consequences of various types of remuneration for an owner-manager of a Canadian-controlled private corporation (CCPC) Apply section 15 of the ITA compute shareholder benefits Describe the tax implications of section 15 on shareholder transactions Apply section 83 of the ITA to compute the balance in the Capital Dividend Account Describe the tax implications of the Capital Dividend Account Page 29 of 34

30 Discussion 11.1: Providing Tax Advice Describe the benefits of incorporation Identify the legal structures for a business Describe tax planning opportunities related to the Active Business Income of a Canadiancontrolled private corporation (CCPC) Describe the tax consequences of various types of remuneration for an owner-manager of a Canadian-controlled private corporation (CCPC) Quiz 11: Quiz 11.1 Describe the benefits of incorporation Identify the legal structures for a business Describe tax planning opportunities related to the Active Business Income of a Canadiancontrolled private corporation (CCPC) Describe the tax consequences of various types of remuneration for an owner-manager of a Canadian-controlled private corporation (CCPC) Apply section 15 of the ITA compute shareholder benefits Describe the tax implications of section 15 on shareholder transactions Apply section 83 of the ITA to compute the balance in the Capital Dividend Account Describe the tax implications of the Capital Dividend Account Supplemental Assignment 11.1: Tax Planning Issues for Corporations Describe the benefits of incorporation Identify the legal structures for a business Describe tax planning opportunities related to the Active Business Income of a Canadiancontrolled private corporation (CCPC) Describe the tax consequences of various types of remuneration for an owner-manager of a Canadian-controlled private corporation (CCPC) Apply section 15 of the ITA compute shareholder benefits Describe the tax implications of section 15 on shareholder transactions Apply section 83 of the ITA to compute the balance in the Capital Dividend Account Describe the tax implications of the Capital Dividend Account Reading: Byrd & Chen's Canadian Tax Principles, Edition Chapter 9, "Other Income, Other Deductions, and Other Issues" Chapter 14, "Other Issues in Corporate Taxation" Chapter 15, "Corporate Taxation and Management Decisions" Assessment Notes: Assignment 11.1: Theory questions related to tax planning issues for a corporation Page 30 of 34

31 Supplemental Assignment 11.1: Alternative questions related to tax planning issues for a corporation Discussion 11.1: Provide tax advice to client on benefits of incorporation including owner-manager remuneration Readings: Chapter 14: Section "Capital Dividend Account" to Chapter 15: Sections, "The Decision to Incorporate" 15-1 to 15-57, "Shareholder Benefits Including Loans" to , "Management Compensation" to Chapter 9: Sections to (Section 69) and to Notes: Updates: None CPA competencies: Assesses a corporate tax entity's general tax issues o Legal Forms and Structures (a) Sole Proprietorship (B) (b) Corporation (private, CCPC, public) (B) (c) Joint ventures (C) (d) Partnerships (C) o Sources and Computation of Taxable Income (e) Other Sources of income inclusions and deductions Interest-free or low-interest loans (B) Advises on tax consequences of specific tax-planning opportunities for shareholders and their closely held corporations Analyzes the tax consequences or planning opportunities for complex corporate transactions Describes the tax consequences of other corporate and partnership restructuring transactions o Tax Planning for Corporations and Individuals (a) Owner-manager tax planning: Compensation options for ownermanager/employment income versus dividends (C) (a) Owner-manager tax planning: shareholder and employee benefits and loans, deemed interest paid (C) Page 31 of 34

32 Lesson 12: Corporate Reorganizations Outcomes: Explain the mechanics of corporate reorganizations Presented: Topic 1: Corporate Reorganization Theory Describe tax basis shareholder s equity Compute Paid Up Capital (PUC) Describe the different types of corporate dividends Topic 2: Corporate Reorganizations Describe the implications of a corporate reorganization under section 85 of the Income Tax Act Describe the implications of a corporate reorganization under section 86 of the Income Tax Act Apply the provisions of section 84 of the Income Tax Act to compute deemed dividends Topic 3: Sale of a Business Describe the tax implications on the sale of a Canadian-controlled private corporation (CCPC) achieved by the sale of corporate assets or the sale of the corporation s shares Topic 4: Tax Planning Recognize the tax planning opportunities related to corporate reorganizations Describe tax planning opportunities related to the sale of a business Assessed: Assignment 12.1: Corporate Reorganization Describe the implications of a corporate reorganization under section 85 of the Income Tax Act Describe the implications of a corporate reorganization under section 86 of the Income Tax Act Apply the provisions of section 84 of the Income Tax Act to compute deemed dividends Discussion 12.1: Anti-Avoidance Rules Describe the implications of a corporate reorganization under section 85 of the Income Tax Act Apply the provisions of section 84 of the Income Tax Act to compute deemed dividends Quiz 12: Quiz 12.1 Page 32 of 34

33 Describe tax basis shareholder s equity Compute Paid Up Capital (PUC) Describe the different types of corporate dividends Describe the implications of a corporate reorganization under section 85 of the Income Tax Act Describe the implications of a corporate reorganization under section 86 of the Income Tax Act Apply the provisions of section 84 of the Income Tax Act to compute deemed dividends Describe the tax implications on the sale of a Canadian-controlled private corporation (CCPC) achieved by the sale of corporate assets or the sale of the corporation s shares Recognize the tax planning opportunities related to corporate reorganizations Describe tax planning opportunities related to the sale of a business Supplemental Assignment 12.1: Reorganizing a Corporation Describe the implications of a corporate reorganization under section 85 of the Income Tax Act Describe the implications of a corporate reorganization under section 86 of the Income Tax Act Apply the provisions of section 84 of the Income Tax Act to compute deemed dividends Reading: Byrd & Chen's Canadian Tax Principles, Edition Chapter 11, "Taxable Income and Tax Payable for Individuals Revisited" Chapter 14, "Other Issues in Corporate Taxation" Chapter 16, "Rollovers under Section 85" Chapter 17, "Other Rollovers and Sale of an Incorporated Business" Course-Level Assessment Milestone 12.1: Tax Planning Advice and Corporate Reorganizations Apply the principles of income taxation to tax planning decisions for corporations Explain the mechanics of corporate reorganizations Assessment Notes: Assignment 12.1: Determine the appropriate corporate reorganization to use in various client situations Supplemental Assignment 12.1: Determine the appropriate corporate reorganization to use in various client situations - Alternate Discussion 12.1: Discussion question on anti-avoidance rules related to corporate reorganizations, specifically S.84.1 and S.85(2.1) provisions Reading: Byrd & Chen's Canadian Tax Principles, Edition Page 33 of 34

34 Chapter 14: Sections, "Tax Basis Shareholders' Equity" to , "Distributions of Corporate Surplus" to Chapter 16: Excluding section called "ITA 55(2)" Chapter 17: section, "Exchange of Shares in a Reorganization ITA 86" to and "Sale of an Incorporated Business" to Chapter 11: Sections "Lifetime Capital Gains Deduction" to Notes: Updates: None CPA Competencies: Advises on tax consequences of specific tax-planning opportunities for shareholders and their closely held corporations Analyzes the tax consequences or planning opportunities for complex corporate transactions Describes the tax consequences of other corporate and partnership restructuring transactions o Tax Planning for Corporations and Individuals (b) Business structure planning Business combinations and corporate reorganizations (NA) Transfer of assets to a corporation (NA) Non-arm's length sale of shares (C) Purchase and sale of assets versus shares (NA) NOTE: The 1st two concepts under (b) are not required knowledge upon entry into CPA PEP Page 34 of 34