Question 1

Which of the following statements is TRUE concerning domestic expansion of a business?

Accepted Answer

A)  Cash funding requirements will be lower to establish a new corporation than a corporate division if the expansion activity incurs substantial start-up losses. 
B) Cash funding requirements will be higher to establish a new corporation than a corporate division if the expansion activity incurs substantial start-up losses. 
C)  Obligations of a new division will have no impact on the founding corporation. 
D)  The main advantage of incorporating an expansion activity is the use of start-up losses from the new corporation against income from the founding corporation. 
A)  Cash funding requirements will be lower to establish a new corporation than a corporate division if the expansion activity incurs substantial start-up losses. 
B) Cash funding requirements will be higher to establish a new corporation than a corporate division if the expansion activity incurs substantial start-up losses. 
C)  Obligations of a new division will have no impact on the founding corporation. 
D)  The main advantage of incorporating an expansion activity is the use of start-up losses from the new corporation against income from the founding corporation. B

Question 2

In the Canada-U.S. tax treaty, the definition of a 'permanent establishment' does not include

Accepted Answer

A)  a place of management. 
B)  a factory. 
C) a storage facility. 
D)  an office. 
A)  a place of management. 
B)  a factory. 
C) a storage facility. 
D)  an office. C

Question 3

The Sweater Corp. is a Canadian corporation which plans to expand internationally. The company has decided to establish a wholly-owned foreign subsidiary corporation in another country. Which of the following is FALSE?

Accepted Answer

A)  The subsidiary will be subject to taxes in the foreign country. 
B) The subsidiary's profits will be included in the Canadian corporation's worldwide income. 
C)  Dividends received by the Canadian corporation from the foreign subsidiary are excluded from the Canadian corporation's taxable income. 
D)  Dividends received by the Canadian corporation from the foreign subsidiary are most often subject to a withholding tax in the foreign jurisdiction. 
A)  The subsidiary will be subject to taxes in the foreign country. 
B) The subsidiary's profits will be included in the Canadian corporation's worldwide income. 
C)  Dividends received by the Canadian corporation from the foreign subsidiary are excluded from the Canadian corporation's taxable income. 
D)  Dividends received by the Canadian corporation from the foreign subsidiary are most often subject to a withholding tax in the foreign jurisdiction. B

Question 4

The Great Big Company (GBC) is a CCPC located in Saskatchewan. GBC owns a foreign subsidiary, The Little Company (TLC). GBC manufactures electronic component parts which are then sold to TLC for assembly. GBC is subject to a 27% corporate tax rate and TLC is subject to a 19% corporate tax rate. Fiona Big, the CEO of GBC, has mentioned that due to the lower tax rate in the foreign country, the profits of GBC could be shifted to TLC by adjusting the selling price of the component parts.
Required:
A) Can Fiona Big adjust the selling price of the component parts in order to take advantage of the lower tax rate? Why or why not?
B) What are three methods used to establish transfer prices for non-arm's length transactions?

Accepted Answer

A) Fiona cannot adjust the selling price

Which of the following statements is TRUE concerning domestic expansion of a business?

In the Canada-U.S. tax treaty, the definition of a 'permanent establishment' does not include

The Sweater Corp. is a Canadian corporation which plans to expand internationally. The company has decided to establish a wholly-owned foreign subsidiary corporation in another country. Which of the following is FALSE?

Taxation-Its Role in Decision Making

Fundamentals of Tax Planning

Liability for Tax, Income Determination, and Administration of the Income Tax System

Income From Employment

Income From Business

The Acquisition, Use, and Disposal of Depreciable Property

Income From Property

Gains and Losses on the Disposition of Capital Property-Capital Gains

Other Income, Other Deductions, and Special Rules for Completing Net Income for Tax Purposes

Individuals: Determination of Taxable Income and Taxes Payable

Corporations-An Introduction

Organization, Capital Structures, and Income Distributions of Corporations

The Canadian-Controlled Private Corporation

Multiple Corporations and Their Reorganization

Partnerships

Limited Partnerships and Joint Ventures

Trusts

Business Acquisitions and Divestitures-Assets Versus Shares

Business Acquisitions and Divestitures-Tax-Deferred Sales

Tax Aspects of Corporate Financing

Gsthst Overview

Business Valuations

Filters

Exam 20: Domestic and International Business Expansion

Which of the following statements is TRUE concerning domestic expansion of a business?

In the Canada-U.S. tax treaty, the definition of a 'permanent establishment' does not include

The Sweater Corp. is a Canadian corporation which plans to expand internationally. The company has decided to establish a wholly-owned foreign subsidiary corporation in another country. Which of the following is FALSE?

Taxation-Its Role in Decision Making

Fundamentals of Tax Planning

Liability for Tax, Income Determination, and Administration of the Income Tax System

Income From Employment

Income From Business

The Acquisition, Use, and Disposal of Depreciable Property

Income From Property

Gains and Losses on the Disposition of Capital Property-Capital Gains

Other Income, Other Deductions, and Special Rules for Completing Net Income for Tax Purposes

Individuals: Determination of Taxable Income and Taxes Payable

Corporations-An Introduction

Organization, Capital Structures, and Income Distributions of Corporations

The Canadian-Controlled Private Corporation

Multiple Corporations and Their Reorganization

Partnerships

Limited Partnerships and Joint Ventures

Trusts

Business Acquisitions and Divestitures-Assets Versus Shares

Business Acquisitions and Divestitures-Tax-Deferred Sales

Tax Aspects of Corporate Financing

Gsthst Overview

Business Valuations

Filters