TriStar Industries Was Recently Denied the Deduction of the Life

question 4

Multiple Choice

TriStar Industries was recently denied the deduction of the life insurance premiums on the life insurance policies of its key executives on the annual tax return. Which of the following general limitations to business profit determination best describes the reason for the Canada Revenue Agency's decision?

• A) insurance proceeds exemption
• B) exempt-income test
• C) reserve test
• D) personal-expense test

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Definitions:

Capital Account Balances

The amounts recorded in the capital account of a company or individual, reflecting initial investment plus retained earnings minus any withdrawals.

Liquidating

The process of converting assets into cash or cash equivalents by selling them.