Personal & Corporate Taxation [TX1] Examination Blueprint 2014/2015

Transcription

1 Purpose Personal & Corporate Taxation [TX1] Examination Blueprint 2014/2015 The Personal & Corporate Taxation [TX1] examination has been constructed using an examination blueprint. The blueprint, also referred to as the test specifications, outlines the content areas covered on the examination and the weighting allotted to each content area. This document also lists the topics, the level of competence for each topic, and the related learning objectives and competencies. The learning objectives have been designed to ensure that the competencies for the course are met. In addition, information is provided on the proportion of each question type presented in the examination (that is, multiple choice, quantitative problems, and so on). Use Students should use the examination blueprint to prepare for the course examination. The blueprint may not include all the topics listed in the course materials; however, students are still responsible for acquiring a broad-based knowledge of all topics not listed in the blueprint since these topics will be tested in assignment and review questions. The topics not listed in the blueprint will also provide students with a greater depth of understanding of taxation concepts. Personal & Corporate Taxation [TX1] Examination Objectives The objectives of this 3-hour, comprehensive examination are to test CGA students on the prerequisite knowledge that is required for advancement into PA1 and PA2, and to ensure that students have the broad-based knowledge in taxation needed to function properly in upper-level education and certification courses. Examination Guidelines for Questions i) Question Type The following are guidelines on the type of questions and their approximate weightings: Question Item Multiple-choice questions Short-answer and/or short case-type problems of both a qualitative and quantitative nature. Description Questions may take a conceptual approach or they may require analytical skills to derive the correct solution. Questions may focus on technical or analytical aspects of the material. Short, integrative cases may be used to pull together related issues. For example, a problem may require students to outline alternatives, supporting their recommendations with numerical analysis. Several questions will also be decision oriented, where the student is asked to take the role of creditor, investor, manager or auditor and make a recommendation or a decision based on analysis performed. Percentage 20% 30% 70% 80% ii) Question Content The following table is organized according to content area and provides information on topics, learning objectives, levels of competence, competencies, and weighting. Examination sessions: March 2015; June 2015; September 2015 Page 1 of 11

2 Personal & Corporate Taxation [TX1] Examination Blueprint Content 1. Introduction and concept of income 4%-8% 1.1 Income tax: History, objectives, and legislative process 1.2 Professional ethics 1.3 Tax evasion, avoidance, and planning 1.4 Administration and enforcement 1.5 Structure and interpretation of the Income Tax Act 1.6 Learning to use the ITA 1.7 Steps in computing income tax 1.9 Liability for Part I tax 1.10 Computation of income 1.11 Steps in computing income Outline the role of income tax in Canadian finances and the tax policy principles underlying the Canadian tax system and explain the legislative process to amend the ITA. Identify situations where ethical problems may occur and analyze ethical problems related to tax planning, preparation, and advising. Distinguish between tax evasion, tax avoidance, and tax planning, giving a broad outline of the general anti-avoidance rule. Describe the procedures for: filing tax returns, assessments, the payment of taxes, and appealing assessments, and demonstrate a general knowledge of the powers conferred on the Canada Revenue Agency (CRA) for administering and enforcing the ITA, including the civil penalties applicable to third parties. Describe the structure of the ITA and interpret its provisions. Explain how to use the ITA. Describe the steps in the computation of Part I tax. Determine who must pay income tax in Canada and on what income and determine if a person is resident in Canada. Describe the source concept and compute income for tax purposes for a taxpayer liable for Part I tax. Calculate income (net income) according to section 3 of the ITA. PK:BE:02: Advises on business decisions in the context of larger economic and geopolitical conditions. PK:BE:04: Advises on business decisions in the context of the legal framework. PR:ET:01: Applies professional ethical standards. PR:ET:02: Exercises integrity and a high level of professional judgment. PR:ET:05: Plans and exercises due diligence. PR:PD:02: Contributes to research and technical advancements in the profession. PK:TX:01: Determines and advises on taxpayer s regulatory requirements and exposure. PK:TX:03: Ensures compliance with all taxation reporting and filing requirements. PK:TX:04: Reviews, advises on, and replies to assessments and reassessments. PK:TX:05: Advises on and provides support for objections, appeals, and litigation. PR:CM:03: Communicates information in a timely, clear, and concise manner. Examination sessions: March 2015; June 2015; September 2015 Page 2 of 11

3 2. Employment income 8%-11% 2.1 Definition of income from office and employment 2.2 Ethical concerns in tax planning for employees 2.3 Amounts to include in employment income 2.4 Automobiles and other taxable benefits Explain and apply the basic rules used to determine employment income and the criteria for differentiating between an employee and an independent contractor. Comment on ethical issues that a CGA may face in tax planning for employees. Determine the amounts taxable as income from employment and the value of non-cash taxable benefits received by virtue of employment. Determine the amount taxable as employment benefit for employer-provided automobiles, loans, and housing subsidies including the taxation of allowances. PR:ET:01: Applies professional ethical standards. PK:TX:08: Evaluates and advises on tax implications of alternative business decisions. PR:PS:02: Collects, selects, verifies, and evaluates information relevant to the problem. 2.5 Stock options Determine the amounts and the timing of income inclusion of the benefit when an employee acquires shares under a stock option plan. 2.6 Deductions in computing employment income Determine and calculate deductions allowed in computing employment income. Examination sessions: March 2015; June 2015; September 2015 Page 3 of 11

4 3. Business income 12%-17% 3.1 Definition of business income 3.2 General principles 3.3 Amounts included in computing business income 3.4 Restrictions on deductions 3.5 Permitted deductions 3.7 Cessation of a business and ethical issues Identify the criteria for differentiating business income from employment income, capital gains, and income from property, and distinguish between business income and income from a hobby or personal venture. Explain how sections 9, 12, 18, and 20 are the foundation for business income taxation and explain the difference between business income for tax purposes and accounting income. Describe the general rules relating to amounts that must be included in computing business income. Explain and apply the restrictions and general principles applicable to expense deduction in computing business income. Identify some expenses that are specifically deductible. Explain dispositions that occur when a business ceases; analyze a difficult ethical situation and generate possible courses of action. PR:ET:01: Applies professional ethical standards. PR:ET:02: Exercises integrity and a high level of professional judgment. PR:ET:03: Maintains objectivity and independence in appearance and fact PR:SE:03: Applies professional skepticism. tools in the workplace PK:BE:04: Advises on business decisions in the context of the legal framework. PR:IA:02: Evaluates the interrelationship of an issue on different functions of the organization and applies concepts and approaches within and across functional areas to develop integrative solutions. PR:PS:02: Collects, selects, verifies, and evaluates information relevant to the problem. PR:PS:04: Generates and evaluates alternative solutions. PR:PD:03: Enhances the profession s image/reputation. Examination sessions: March 2015; June 2015; September 2015 Page 4 of 11

5 4. Capital cost allowance and eligible capital property 9%-13% 4.1 Transactions between persons not dealing at arm s length 4.2 Tax depreciation system 4.3 Capital cost allowance 4.4 Non-arm s length acquisitions (depreciable property) 4.5 Eligible capital property Determine whether persons are dealing with each other at arm s length and the tax consequences of transactions between persons not dealing at arm s length when there is inadequate consideration. Explain the rationale of the tax depreciation system. Apply the general rules of the CCA system and explain the applicability of CCA and recapture rules to lease option and leasing agreements. Explain the provisions for depreciable capital property transactions when the vendor does not deal at arm s length with the purchaser. Determine what constitutes an ECP and the implications of disposing of an ECP. PK:TX:06: Analyzes and advises on tax planning issues. PK:TX:08: Evaluates and advises on tax implications of alternative business decisions. PK:BE:02: Advises on business decisions in the context of larger economic and geopolitical conditions. PR:PS:02: Collects, selects, verifies, and evaluates information relevant to the problem. Examination sessions: March 2015; June 2015; September 2015 Page 5 of 11

6 5. Income from property, income from other sources, and other deductions 8%-13% 5.1 Income from property: Introduction 5.2 Interest 5.3 Dividends 5.4 Rental income Explain the distinction between income from property and other types of income, and the importance of such a distinction. Explain and apply the rules for the annual reporting of interest. Determine the taxable amount of a dividend received, and explain why the tax treatment of a dividend paid by a Canadian corporation differs depending on whether it is received by an individual or by a corporation. Compute the rental income of a taxpayer, taking into account the special rules concerning the CCA that may be claimed. PK:TX:03: Ensures compliance with all taxation reporting and filing requirements. PK:TX:06: Analyzes and advises on tax planning issues. PK:TX:08: Evaluates and advises on tax implications of alternative business decisions. 5.5 Shareholder benefits Explain why and how a shareholder is taxed on the value of benefits received from the corporation of which he is a shareholder, and explain the tax consequences of loans to shareholders. 5.6 Other income Identify other income sources and explain why they are dealt with in a separate ITA subsection. 5.7 Deductions from property income and other deductions Compute net income from property using the applicable ITA sections; explain the underlying principles and apply the most common rules relating to the deduction of common subdivision (e) amounts. 5.8 Saving for retirement Explain the general principles relating to registered pension plans and registered retirement savings plans, and determine the contribution limit. 5.9 Attribution rules Describe and apply the attribution rules when property is transferred or loaned to a spouse/common-law partner or children under the age of 18. Examination sessions: March 2015; June 2015; September 2015 Page 6 of 11

7 6. Capital gains and losses 9%-12% 6.1 Introduction to capital gains 6.2 Capital property and disposition 6.3 General rules for determining taxable capital gains and allowable capital losses 6.4 Specific provisions for capital gains and losses Explain why capital gains and losses are treated differently from other types of income. Describe what types of property and what circumstances give rise to capital gains or losses. Calculate taxable capital gains, allowable capital losses, and the allowable capital gains reserve. Describe specific rules that apply in the calculation of capital gains and losses, including the treatment for identical properties and depreciable property, and the restrictions on the deduction of capital losses for personal-use property, listed personal property, superficial losses, and business investment losses. PK:TX:03: Ensures compliance with all taxation reporting and filing requirements. PK:TX:06: Analyzes and advises on tax planning issues. PK:TX:08: Evaluates and advises on tax implications of alternative business decisions. 6.5 Special rules: principal residence exemption, change in use, and replacement property Explain the special rules for the principal residence exemption, changes in use, and replacement property. Examination sessions: March 2015; June 2015; September 2015 Page 7 of 11

8 7. Taxable income and tax payable Individuals 9%-12% 7.1 Deductions in computing taxable income 7.2 Deductions in computing taxable income losses 7.3 Capital gains deduction 7.4 Computing Part I tax Calculate taxable income and explain the order in which deductions must be claimed. Explain the concept of loss carryover and apply the process to carry over losses by category. Calculate the capital gains deduction in simple cases. Compute tax under Part I, describe the functioning of tax brackets, the importance of the marginal tax rate, and the general principles of tax planning. PK:TX:06: Analyzes and advises on tax planning issues. PK:TX:09: Designs and advises on international tax planning. 7.5 Non-refundable tax credits 7.6 Computing tax under Part I.2 and split income Identify and apply the available non-refundable tax credits. Compute Part I.2 tax, and tax adjustments related to split income. Examination sessions: March 2015; June 2015; September 2015 Page 8 of 11

9 8. Taxable income and tax payable Corporations Part 1 8%-13% 8.1 Types of corporations 8.2 Calculating net income and taxable income 8.3 Federal basic tax, general rate reduction, and tax abatement 8.4 Associated corporations and the small business deduction Explain the principles underlying the taxation of corporations, identify the different types of corporations, and explain why the differences are important. Reconcile accounting income and net income for tax purposes, classify the different types of income of a corporation, and determine the taxable income. Compute the basic tax payable, the general rate reduction, and the tax abatement under Part I, identifying common deductions in this process, and briefly explain the process of allocating taxable income among provinces. Calculate the small business deduction including the situation of an associated corporation. PK:TX:01: Determines and advises on taxpayer s regulatory requirements and exposure. advises on taxpayer s tax liability. PK:TX:08: Evaluates and advises on tax implications of alternative business decisions. PK:BE:08: Implements and advises on measures to mitigate enterprise risk. PR:PS:02: Collects, selects, verifies, and evaluates information relevant to the problem. 8.5 Other deductions in calculating tax payable Determine whether a corporation is eligible for the manufacturing and processing profits deduction, the federal political tax credit, the investment tax credit, and the foreign tax deduction. Examination sessions: March 2015; June 2015; September 2015 Page 9 of 11

10 9. Taxable income and tax payable Corporations Part 2 11%-15% 9.1 Refundable tax on CCPC s investment income 9.2 Part IV tax 9.3 Integration principle and distribution of corporate surpluses 9.4 Capital dividend account 9.5 Incorporated and unincorporated businesses Compute Part I tax payable on investment income and explain the principles underlying the taxation of aggregate investment income. Compute Part IV tax payable, the balance in the refundable dividend tax on hand (RDTOH) account, and a dividend refund. Describe the principle of integration and the effects of the distribution of corporate surpluses. Compute the capital dividend account balance. Evaluate the tax advantages and disadvantages of incorporating a business and justify the decision to incorporate or not. PK:TX:06: Analyzes and advises on tax planning issues. PK:TX:08: Evaluates and advises on tax implications of alternative business decisions. PK:BE:02: Advises on business decisions in the context of larger economic and geopolitical conditions. PK:BE:08: Implements and advises on measures to mitigate enterprise risk. 9.6 Shareholder-manager remuneration Determine an appropriate shareholder-manager remuneration plan. Examination sessions: March 2015; June 2015; September 2015 Page 10 of 11

11 10. International taxation 2%-6% 10.1 Part-year residents 10.2 Non-residents: Tax payable under Part I 10.3 Non-residents: Tax payable under Part XIII 10.4 Tax conventions 10.5 Other international tax matters 10.6 Ethical concerns in international transactions Determine the main tax consequences of a person resident in Canada for only part of the year. Determine when a non-resident is subject to Part I tax. Determine when a non-resident is subject to Part XIII tax. Explain the function and importance of the tax conventions entered into by Canada with other countries. Explain the general concepts of transfer pricing, international financing, and information reporting. Identify and analyze situations that can cause ethical problems when a client conducts international transactions. PK:TX:01: Determines and advises on taxpayer s regulatory requirements and exposure. PK:TX:03: Ensures compliance with all taxation reporting and filing requirements. PK:TX:09: Designs and advises on international tax planning. PR:CM:03: Communicates information in a timely, clear, and concise manner. PR:ET:01: Applies professional ethical standards. PR:ET:02: Exercises integrity and a high level of professional judgment. PR:ET:03: Maintains objectivity and independence in appearance and fact. PR:ET:04: Protects the public interest. Examination sessions: March 2015; June 2015; September 2015 Page 11 of 11