UNIVERSITY OF WATERLOO

School of Accounting and Finance

AFM 361 - Taxation I

Course Outline
Spring 2011

Morning Sections Afternoon Sections

Professor: Ken Klassen Professor: Alan Macnaughton
Office: HH 3103 Office: HH 3119
Office Hours: W 9:00 – 12:00 Office Hours: M 12:00 – 1:00,
Tu and Th 4:00 – 5:00
E-mail: kklassen@uwaterloo.ca E-mail: amacnaug@uwaterloo.ca
Telephone: 888-4567 ext. 38550 Telephone: 888-4567 ext. 35944

Course Objective

This course builds on AFM 201. It is the first of two full-term introductory courses in
federal income tax law that are designed to achieve the following objectives:
1) to explain the theoretical concepts behind the specific provisions of the law;
2) to apply the law in practical problems and case settings, both from a compliance and
a planning perspective; and
3) to interpret the law, taking into account the specific wording of the provisions,
judicial decisions and the Canada Revenue Agency’s position.

Evaluation

The student’s achievement of the objective will be evaluated using research assignments,
class preparedness and contribution, and examinations.

Examination Dates, Deadlines and Weights Values

1) Class preparedness and contribution 10%

2) Research assignments
#1 Friday, May 20, 6 p.m. 5%
#2 Tuesday, June 28, 6 p.m. 15%
By the deadline, one group member should upload the assignment to the
electronic drop box and submit a hard copy to the bin outside HH 290.
Late assignments will receive a reduced or zero grade, as detailed below.
3) Mid-term examinations:
#1 Friday, May 27, 5:30 to 6:30. Rooms TBA 10%
#2 Thursday, July 7, 5:30pm to 7:30pm. Rooms TBA. 25%
4) Final examination: Exam period (scheduled by the Registrar) 35%
2 AFM 361 – Taxation I

Text Material

The required texts are:

1) R.E. Beam, S.N. Laiken and J.J. Barnett, Introduction to Federal Income Taxation
in Canada, 2010-2011, 31st Edition, CCH Canadian Limited, North York, Ontario,
2010. Available in the UW bookstore.
2) AFM 361 Course Notes, to be purchased from the UW Bookstore: excerpts from Yoko
Beriault and Carol Mohammed, CCH Guide to Researching Canadian Income Tax
(CCH Canadian, Toronto, 2005); and supplements to Beam, Laiken and Barnett.
3) iClickers, available through the UW bookstore.

The “optional” text is:

1) Canadian Income Tax Act with Regulations, CCH Canadian Limited, North York,
Ontario, 2010.

Class Preparedness and Contribution

Being prepared for class is a vital part of the learning in this course. Learning is to occur
through a combination of preparation of problems before class, instruction and active
student participation in discussions during class, and review and assimilation after class.
Success in this course will be maximized by ongoing and dedicated effort in all three aspects
of this process. Clearly, being in class is critical to success, but not sufficient for it.

Classroom contribution will be evaluated each class based on presenting and discussing
assigned problem material. To facilitation participation by all students, iClickers will be
used. In general, demonstrated effort, rather than correctness, will be the basis of
evaluating this component of the course. So, providing the correct answer in class iClicker
surveys is maximally rewarded, but other responses will receive 40% credit. The class
contribution component of the total mark is an integral part and will not be waived. You
will want to be on time for each class since iClicker questions will generally begin at the
beginning of the class. An average of 4 clicker questions will be presented in each class.

iClicker questions are designed to encourage preparedness and assimilation. Usually the
question will only be up on the screens for 1 minute: this is enough time if the homework is
done in advance, but it may be too short to determine the correct solution otherwise.

Based on guidance from the Dean’s office, iClicker participation will only be recorded in the
section the student is registered. To address situations where students forget their
iClickers (or batteries die), a sign-in list will be available during class. Signing in will
generate a participation score equal to that of answering incorrectly all questions for the
day; attendance throughout the class is required.

Because students are sometimes sick, have job interviews, or could not prepare for class,
there is a desire to have iClicker marks for some days dropped. The logistics of keeping
records for all students for specific reasons make this impractical, given the number of
classes and the number of students. Instead, to allow for these possibilities, the two lowest
days will be dropped in calculating the iClicker mark.
Course Outline, Spring 2010 3

Assignments

The assignments are opportunities for the student to learn how to conduct tax research and
to integrate concepts learned in the course. The assignments will be available in UWACE
in the “Lessons” folder. Both assignments are to be prepared in groups of three (or less).
Members of the group for assignment #1 cannot be members of the same group for
assignment #2. No credit will be given for this course unless both assignments are
submitted. Late assignments will receive a reduced grade of 5% immediately (e.g., 85% to
80%) and 5% more for each subsequent day late for up to six days. Some assignment
solution must be handed in on the sixth day, or no course credit will be granted.

Optional Tutorials

To help students assimilate knowledge and prepare for the exams, optional tutorials will be
offered. The tutorials have been tentatively scheduled for May 24, June 6, June 20, and
July 4, from 4:30 – 6:00 in DC 1351. The tutorials will be a combination of a 30 minute
mock exam writing, answer take-up, and Q&A.

Exams

The exams will present fact situations, and the student will be required to identify potential
tax problems and opportunities and to resolve these situations by applying the Income Tax
Act and relevant common law.

Calculators and one annotated copy of the Income Tax Act will be allowed for all
examinations. “Annotated” does not include pasting, stapling, or otherwise attaching or
inserting any paper into the Act (even original pages). Small tabs are permitted if used
judiciously and do not exceed 10 cm2. Tabs should be used solely for the purpose of allowing
the student to find a location quickly (have only the section number or provision initials;
e.g., “CCA”). Examples of acceptable tabs are Post-It® Flag markers (1.3 cm x 5 cm) or
Durable Tabs (2.5 cm x 4 cm).

In the past, some students have said that they do not need to have a printed Income Tax
Act, and they can rely on electronic copies instead. Unfortunately, there is no simple way to
allow access to those electronic copies during the exam while maintaining exam integrity.
However, we will allow an exam option to accommodate this group of students.

In place of the Income Tax Act, students will be allowed to bring into the exam three sheets
of paper of standard size (31.6 cm by 28 cm) on which handwritten notes can be made (on
both sides). Nothing may be attached to these pages. This option acknowledges that there is
space to make notes in the printed Income Tax Act. The number of blank pages at the front
and back of a standard Act is between one and four, depending on the publisher of the Act.
Occasionally, a student will be unable to write a midterm exam for medical or other
legitimate reasons. Only in the two circumstances identified below, the midterm’s weight
will be added to the final exam. We could ask for medical notes or other documentation, but
instead we rely on the integrity of our students. However, we require the following:
4 AFM 361 – Taxation I

Medical reasons: A student must submit a signed statement attesting that he or

she was unable to write a midterm exam for a medical reason. This note must be
submitted within two academic days of the exam.
Other legitimate reasons: If other legitimate reasons exist, a written statement
must be submitted, and explicit instructor agreement must be obtained, in advance.

For the final exam, a medical note on the university-approved form must be submitted
(www.healthservices.uwaterloo.ca/Health_Services/verification.html). Missed final examinations
follow the policies of the School of Accounting & Finance; that is, the missed final
examination will be taken at the next regular sitting of the course.

UW-ACE

UWACE can be accessed through www.uwace.uwaterloo.ca. To enter the site, you must
enter your UW username and your Quest password. The “Lessons” folder of UWACE will
provide students with access to files of materials such as assignments or in-class slides.
UW-ACE will not be used for email – contact your instructor directly.

Academic Integrity

Academic integrity violations sometimes occur when concern over grades exceed concern
over maintaining a high ethical standard. Do not make this choice.

Ethics and values are very important in accounting and in business, not-for-profit, and
government organizations. You will be considering ethical issues in the accounting
profession throughout this program. Ethics and values are also important in education.
Instructors will assume, unless there is evidence to the contrary, that you are an ethical
student. To help you fulfil your ethical responsibilities as a student, the ethical standards
for this course are listed below.

* Used with permission, The Record, May 14, 2009: E9.

Course Outline, Spring 2010 5

Students majoring in accounting programs at UW should be aware that, due to the highly
structured nature of the study plans and the fact that many AFM courses are offered on a
limited basis, a penalty imposed as a result of an academic offence could result in a
significant delay of the student’s degree completion and convocation dates—particularly if
the penalty involves a suspension.

Graded group assignments

All work is to be performed exclusively by the members of the groups and all group
members must contribute their fair share to each assignment. If outside research is
performed, sources are to be cited and information discovered via outside research is to be
clearly labelled as such. If outside research is performed, the products of your research
are not to be shared with any student who is not a member of the group.

Examinations

All exams must be the exclusive work of the individual student.

iClickers

An iClicker is to be used only by the student to whom it is registered.

If you know that another student is violating these standards

Allowing another student to obtain course points by deceit contributes to a general lowering
of the ethical standards of the University and to the deception of potential employers and
other academic institutions. Thus, you have an obligation to take some action when you
know another student is violating the course’s academic integrity standards. This is a
difficult personal trial to face, but it is an important part of your ethical obligation as a
student. If you know that another student is violating the standards, it is your
responsibility to inform the student’s instructor.

Avoidance of academic offences

All students registered in the courses of the Faculty of Arts are expected to know what
constitutes an academic offence, to avoid committing academic offences and to take
responsibility for their academic actions. When the commission of an offence is established,
disciplinary penalties will be imposed in accord with Policy #71 (Student Academic
Discipline). For information on categories of offences and types of penalties, students are
directed to consult the summary of Policy #71 which is supplied in the Undergraduate
Calendar (section 1); on the Web at:
http://www.adm.uwaterloo.ca/infosec/Policies/policy71.htm

If you need help in learning how to avoid offences such as plagiarism, cheating, and double
submission, or if you need clarification of aspects of the discipline policy, ask your course
instructor for guidance. Other resources regarding the discipline policy are your academic
advisor and the Undergraduate Associate Dean.
6 AFM 361 – Taxation I

Students who believe that they have been wrongfully or unjustly penalized have the right
to grieve; refer to Policy #70, Student Grievance. …/Policies/policy70.htm

Further reference can be made to the Academic Integrity Office of the university:
http://uwaterloo.ca/academicintegrity/

Citation of sources

(from “Some Suggestions and Guidelines for Writing Classical Studies Essays” by Sheila L.
Ager, Classical Studies, http://www.arts.uwaterloo.ca/CLASS/essays.htm)

Proper citation of sources is absolutely vital to essay writing. You must acknowledge your
sources for a variety of reasons. Foremost is that of credit: it is important that you give
proper credit to the work of the various scholars whom you have employed. If you don’t,
then your paper is open to the charge of plagiarism. Plagiarism is a form of scholarly theft
that occurs not only if you copy someone else’s words and pass them off as your own, but
also if you use someone else’s ideas (even if you use your own words) without acknowledging
them properly. Plagiarism isn’t limited to deliberate fraud; it is something that can happen
simply through inexperience in how to use sources. This is really important to remember:
plagiarism can happen unintentionally!

When you do draw on someone else’s arguments in your paper, either use your own words
to express it (you still need a footnote) or use quotation marks (again, a footnote). If you
employ someone else’s words, but don’t use quotation marks (say, because you changed one
or two little words), then even though you cite them properly in a footnote (as you must),
you’re still being fraudulent in passing off their style as though it was your own. So when I
say “use your own words”, that really means use your own words, it doesn’t mean just
change a couple of vocabulary items. I know that using the words of the original authors
often seems to make sense, since they’re the ones who had the ideas and expressed them so
perfectly; but if that’s the case, then just go ahead and use their words, in quotation marks.

Turnitin

The University of Waterloo has introduced a number of initiatives to enhance academic

integrity on campus. This is partially in response to comments from students on the
academic integrity survey in October 2006 that UW should do more to ensure a ‘level
playing’ field for all students in terms of assignments and examinations.

As a result, plagiarism detection software (Turnitin) will be used to screen assignments in

this course. This is being done to verify that use of all material and sources in assignments
is documented. You can (1) you will submit your assignment through the Turnitin dropbox
in UW-ACE for screening; or, (2) if you choose not to have your assignment screened, an
alternative arrangement must be made with the instructor at least one week in advance of
the due date. The alternative could include providing an annotated bibliography for all
references used and/or providing an original copy of ALL rough drafts of the assignment,
along with the version submitted.
Course Outline, Spring 2010 7

Daily Schedule
Learning Exer- Problems &
# Date Topic resources cises Cases (C)
1 T May 3 Introduction
2 Th May 5 Liability for tax ¶ 2000 – 2260 2: 1–4 2: 4, C2: 1
3 T May 10 Employed vs. self employed, 1135, 3000 – 3035, 3: 1 3: 1
intro to tax research S*: CCH Guide to
Research
4 Th May 12 Employment inclusions 1230 – 1280, 3: 3, 5, 6 3: 2, 3 (not
3037 – 3215 stock option)
5 T May 17 Employment inclusions II 3220 – 3290 3: 7–10 3: 7, 8
6 Th May 19 Employment deductions 3300 – 3470, 3600 3: 12, 14 3: 14
F May 20 Assignment #1 Due
7 T May 24 Business income basic rules 4000 – 4150, 4: 2 4: 2, 1
8000 – 8,035
8 Th May 26 Class canceled
F May 27 Midterm #1—5:30 – 6:30
9 T May 31 Deductions for bus income 4200 – 4245, S 4015 4: 4, 6, 8 4: 5, 7
10 Th June 2 Deductions for bus income II 4250 – 4325 4: 12 4: 16
11 T June 7 CCA 5000 – 5080, 5: 1, 3, 4, 5: 2
5110 – 5150 9
12 Th Jun 9 Eligible capital property 5200 – 5330 5: 10, 11 5: 4
13 T Jun 14 Exchange of property 5090 – 5100, 5: 7, 8: 2 8: 3, 6
8170 – 8200
14 Th Jun 16 Division C – loss carry 8400, 10030 – 10040, 11: 1–5 11: 1
forwards 10070 – 10080,
11000 – 11085
15 T Jun 21 Acquisition of control 11090 – 11155 11: 6–8 11: 3
16 Th Jun 23 Acquisition of control II 11160 EP†: 1
17 T Jun 28 Computation of tax payable 11200 – 11337 11: 9, 10 11: 6
Assignment #2 Due
18 Th Jun 30 SR&ED 4310 – 4325, 4: 15, 11: 7
11340 – 11370
19 T July 5 GST 1400 – 1470, 3: 15,
2300 – 2380, 3500, 4: 15
4400 – 4500
20 Th July 7 Midterm #2—5:30 – 7:30
21 T July 12 Intro to tax planning S* 1900 – 1945 S 1: 1–4
22 Th July 14 Tax planning for businesses S 4: 1, S 8: 1
(A) – issues
23 T July 19 Integration and tax planning S 8: 1 (B),
for businesses ICAO issues
24 Th July 21 Integration of tax issues ICAO,
S 11: 1
* Note: “S” denotes that these resources, problems or cases are found in the supplement notes.
† Note: “EP” denotes problems available electronically via UW-ACE.