Question 1

Casey Raja was required to pay for numerous employment expenses in 2020.The expenses deducted on Casey's tax return totaled $12,000 which included $2,000 CCA.The expenses all included a 15% HST component, other than the CCA which had a deemed inclusion since HST was originally paid on the vehicle.If Casey applied for an HST rebate in 2021 when preparing the 2020 return, what impact would the rebate have on the 2021 return?

A)Increase in employment income of $1,304 and increase in UCC of $261
B)Increase in employment income of $1,304 and decrease in UCC of $261
C)Increase in employment income of $1,565
D)Decrease in employment income of $1,565

B

Accepted Answer

Since Casey paid HST on all expenses other than CCA, the HST component of $1,650 ($10,000 x 15%) can be claimed as an input tax credit (ITC) on Casey's HST return for 2020. If Casey applies for an HST rebate, the rebate would be the difference between the ITC and the HST paid on the CCA. The HST paid on the CCA is deemed included in the CCA calculation, so it is not refundable. The HST paid on the other expenses is refundable. Therefore, the HST rebate for Casey would be $1,389 ($1,650 - $261).

As a result, the employment expenses deducted on Casey's return must be reduced by $1,389, resulting in an increase in taxable employment income of $1,389. Also, since the CCA claimed on the return is now less than the eligible CCA for tax purposes, the UCC must be reduced by $261. Hence, the correct option is B.

Question 2

Carmel Co.earned $20,000 in revenue and paid $15,000 in expenses (that do not include meals and entertainment).How much GST will Carmel remit using the simplified ITC calculation? (Carmel is in a province with 5% GST.)

A)$0
B)$238
C)$250
D)$652

B

Accepted Answer

To calculate the amount of GST remitted using the simplified ITC calculation, we need to follow these steps:

1. Calculate the total GST collected: $20,000 x 5% = $1,000
2. Calculate the total ITCs (input tax credits) available: $15,000 x 5% = $750
3. Calculate the net tax owed: $1,000 - $750 = $250

Therefore, Carmel will remit $250 in GST using the simplified ITC calculation, which corresponds to answer choice C.

Question 3

With respect to the GST/HST, supplies fall under different categories with different sets of rules.Which of the following is false with regard to zero-rated supplies?&#10;A)Zero-rated supplies are not included in the determination of the mandatory reporting period.&#10;B)GST/HST is charged at a rate of 0%.&#10;C)Prescription drugs and medical devices are examples of zero-rated supplies.&#10;D)Input tax credits may be claimed on expenditures made to provide the zero-rated supplies.

Accepted Answer

Zero-rated supplies are still included in the mandatory reporting period, despite the fact that no GST/HST is charged on them.

Question 4

When closely related groups for tax purposes elect not to charge GST/HST to members of the group, which of the following applies?&#10;A)There is an actual tax saving for the group.&#10;B)There is an actual tax saving for the member only.&#10;C)An actual tax saving does not take place until the following year.&#10;D)An actual tax saving does not take place.

Accepted Answer

When closely related groups for tax purposes elect not to charge GST/HST to members of the group, there is no actual tax saving for either the group or the member. This is because GST/HST charged and collected by the group from its members is offset by the input tax credits claimed by the group, resulting in a net tax of zero. Therefore, not charging GST/HST does not result in any tax savings for the group or its members.

Question 5

Island Tours Inc.earned $80,000 in revenue and paid $45,000 in operating expenses.If Island Tours elects to use the quick method, how much is the net HST remittance? (Island Tours is in a province with 13% HST and an 8.8% remittance rate.)

A)$3,080
B)$4,550
C)$6,740
D)$7,040

Accepted Answer

The answer of Island Tours Inc.earned $80,000 in revenue and...

Question 6

Jan Jolly operates a service business in New Brunswick.The company's 2020 financial information includes the following:

Required:
Determine Jan's net HST remittance using the simplified method.
Round all amounts to zero decimal places.

Accepted Answer

The answer of Jan Jolly operates a service business in...

Question 7

With respect to the GST/HST, supplies fall under different categories with different sets of rules.Which of the following statements is incorrect with regard to exempt supplies?&#10;A)Exempt supplies are not included in the determination of the mandatory reporting period.&#10;B)GST/HST is not applicable.&#10;C)Childcare services and music lessons are examples of exempt supplies.&#10;D)Input tax credits may be claimed on expenditures made to provide the exempt supplies.

Accepted Answer

Exempt supplies do not allow for the claiming of input tax credits on expenditures made to provide them. This is because GST/HST is not charged on these supplies, and as such, the tax cannot be recovered through input tax credits.

Question 8

Which of the following scenarios will not be allowed to elect to eliminate the GST/HST on the sale of Tree Co.to Leaf Co.?&#10;A)Tree Co.and Leaf Co.are both GST/HST registrants.&#10;B)Neither Tree Co.nor Leaf Co.are GST/HST registrants.&#10;C)Tree Co.is a GST/HST registrant, and Leaf Co.is not a GST/HST registrant.&#10;D)Tree Co.is not a GST/HST registrant, and Leaf Co.is a GST/HST registrant.

Accepted Answer

For the election to eliminate GST/HST on the sale, both parties involved in the transaction must be GST/HST registrants. If one party is not a registrant, as in option C, the election cannot be made.

Question 9

With respect to GST/HST on residential property, which of the following statements is incorrect?&#10;A)GST/HST is charged on the sale of brand new homes.&#10;B)GST/HST is not typically charged on the sale of used homes.&#10;C)GST/HST is charged on residential rent if the rental is for a term of more than one month.&#10;D)GST/HST is charged on the sale of homes which have undergone substantial renovations to become 'new' again.

Accepted Answer

GST/HST is not charged on residential rent regardless of the term of the rental.

Deck 22: GST/HST Overview