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    3 views6 pages

    Alarie April 2012 PDF

    Uploaded by

    Scott Li

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    © All Rights Reserved
    Download as PDF or read online from Scribd
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    of 6
    ‘Annual Examinations, 2011-2012 Page 1 of 6 ‘Canadian income Tax Law, Professor Alarie UNIVERSITY OF TORONTO FACULTY OF LAW DATE: — Fiiday, Api 20, 2012 TIME: 930 a'm—12:0 pm, (CANADIAN INGOME TAX LAW, Examiner: Professor Alarie NOTE: 4. You may use any kind of hard-copy material you wish during the examination, ‘except for books owned by the library. You may not use any electronic reference materials, Calculators are permited 2. The exam has three “perspective” questions of equal value (worth 10%) and 418 ‘coenario" questions of equal value (worth 90%). The three “perspective” ‘questions have a word mit of 0 words each. The others have no word lint. 3. Cell phones, pagers and other communication devices are prohibited in ‘exams, Cell phones are not permitted as a time keeping device and should not be visible on the desk during an examination. Communication devices left on the ddesk during an exam may be removed by the invigllato. 4, Before you begin, ensure that you have writen your psoudoname, course name, and the numberof the booklet on each examination booklet and the name ofthe instructor on the first booklet. Ifyou request an addtional booklets) during the examination, write the required information on the booklet at the time you receive it. No time vill be permitted for this atthe end of the examination, '5, Duting the examination, only one student at atime is permitted to leave the ‘examination room. No sludent may leave within fiteen minutes of the conclusion of the examination. 6, Al the end of this examination, the inviilator will ask you to stop writing, count the total number of booklets used, ecard this on the font of the fist booklet, ancl insert all booklets into the fist booklet. For students who are typing their ‘cxaminaton, the inviglator wal ask you to stop Iyping and exit Examsoft. You will then remain seated and quiet until all the examination aperslenvelopes are collected, The invigilator(s) wil let you know when you ‘cah leave the examination room. 7. Time limits willbe strictly enforced. Students who continue to write of ype ater the examination has ended will have thelr answer booketslexamination envelope collected separately and may be subject to a penalty. Anqual Examinations, 2011-2012 Page 2016 ‘Canadian Income Tax Law, Professor Alarie Porspective Questions (limit your responses to 50 words each) 1. With the beneft of hindsight, do you belleve thatthe change from stict construction te the modern rule of statutory interpretation represents a desirable development for Canadian income tax aw? 2. Ifyou could make one suggestion about how to improve taxwikica, what would it be? 3. Considered as a whole, does Canadian income tax law pay too litle, foo much, or just about the right amount of attention o "economic substance"? Scenario One Mr. Doubletree is a partner in the law firm Doubletree Dutt. On April 19, 2012 the amount in Mr. Doubletree's capital account at the law firm was $500,000, Mr, Doubletree planned to use $400,000 of his eqully in the aw frm toward the purchase of a house. He then planned {o borrow that same amount and use it to replenish his parinership capital account. To this ‘end, on Friday, April 20, 2072 the law firm paid Mr, Doubletree $400,000 from his capital account, The same day, he used that $400,000 toward the purchase of a home registered in his name, On Monday, April 23, 2012, Mr. Doubletree mortgaged the new home to the Bank of Toronto and borrowed $400,000 from the bank. He used this borrowed money to restore the balance of his capital acoount atthe law frm, Mr, Doubletree plans to retire from the law firm at the end of December 2012, On January 2, 2013, the law firm will pay to Mi Doubletree the balance of his capital account, $500,000. Wr. Doubletree expects to pay interest of $12,000 to the Bank of Toronto in 2012 on the borrowed funds. In 2013, Mi Doubletree wil either use the $500,000 toward (a) the purchase price of a Rodin sculpture: oF (b) the purchase price of vacant land outside Toronto, estos re: Seenatio One (no word i 4, Can Mir, Doubletree deduct the $12,000 paid in interest fo the 2012 taxation year? 65. IF Mr. Doubletree retires as expected and uses the $00,000 he receives on January 2, 2013 to buy a Rodin sculpture, will he be able to deduct the interest in 20137 6, IFMr, Doubletree retires as expected and uses the $500,000 he recelves on January 2, 2013 to buy vacant land, will he be able to deduct the interest in 20137 ‘Scenario Two Games Company is in the business of operating dedicated video game machines in arcades and other places, such as pubs and restaurants. In order to maintain maximum revenue earning capacity in a given location, Games Company customarily engages in a rotation of ils machines whereby the top earning machines, after one or two months, are ‘moved from a prime revenue-earning location, such as an arcade, to another location, such fas a pub, The purpose of this rolation system is twofold, First, it maintains consumer ‘Annual Examinations, 2011-2012 Page 3of6 ‘Canadian Income Tax Law, Pr Alario interest in a location by offering new challenges to consumers in the form of new games. ‘Second, by moving the high-fevenue machines from its top locations to less popular ones. (where consumers are less likely to have played the game and accordingly, have more interest int), Games Company is able to generate more revenve from the machine than ift had remained in the previous location. When buying new games, Games Company has the option of purasiny ar ene machine, including anew cab, Foran approximate cust of $4,500. However, the company can also buy “conversion kits" which, in essence, are ‘comprised of a new circult board containing a new video game. These conversion kits can be inserted into an older cabinet after removal of the existing circuit board, and with some minor adjustments (which generally fake less than an hour) have the effect of providing a ‘new game inthe cabinet ofan old one. The old circuit boards have no market value and are

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