Canadian Tax Principles

INSTRUCTOR'S SOLUTIONS MANUAL
Byrd & Chen's Canadian Tax Principles
2011 - 2012 Edition
ISBN-13: 9780132827195; ISBN-10: 0132827190
Copyright © 2011 Clarence Byrd Inc. All rights reserved.
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Updates and corrections to the supplements package
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Principal Residences, Canada This exemption is non-neutral because investment decisions are affected by the tax preference. Given the choice of investing in real estate to hold for resale or a principal residence, both of which are likely to appreciate, a taxpayer will invest in a principal residence so that the gain on disposition is tax exempt.
It is also vertically inequitable because it benefits high-income families who can invest in more expensive residences which have the potential of earning greater returns.
This tax expenditure is spread among all taxpayers, and general tax revenue must be larger to compensate for the revenue foregone.
D. Business Meals, Canada This restriction adds complexity to accounting for deductible expenses, as all business meals have to be accounted for and accumulated separately from other promotion expenses. The tax could be shifted to consumers, employees and/or shareholders. If it is shifted to consumers, it could be more advantageous to raise personal taxes so that incidence is more certain. If it is shifted to shareholders or employees, then it would be non-neutral as it could affect investment decision making and willingness to work.

d

E. Head Tax A head tax is neutral as it does not affect economic choices. However, it
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Assuming the actual 2011 taxes payable are $39,460, it would be the least of the amounts described in ITA 157(1), and interest would be calculated based on this instalment alternative. The rate charged would be the one prescribed in ITR 4301 for amounts owed to the
Minister, the regular rate plus 4 percentage points.
There is a penalty on large amounts of late or deficient instalments. This penalty is specified in
ITA 163.1 and is equal to 50 percent of the amount by which the interest owing on the late or deficient instalments exceeds the greater of $1,000 and 25 percent of the interest that would be owing if no instalments were made.
Interest on the entire balance of $39,460 of taxes payable would be charged beginning on the balance due date, September 30, 2011. The rate charged would be the one prescribed in ITR
4301 for amounts owed to the Minister, the regular rate plus 4 percentage points.
There is no penalty for late payment of taxes, provided a return has been filed. If no return