TriStar Industries Was Recently Denied the Deduction of the Life

question 5

Multiple Choice

TriStar Industries was recently denied the deduction of the life insurance premiums on the life insurance policies of its key executives on its 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) Exempt-income test
• B) Personal-expense test
• C) Insurance proceeds exemption
• D) Reserve test

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Definitions:

Selling Price

The amount of money charged for a product or service, or the sum of the value that customers exchange for the benefits of having or using the product or service.

Revenue Variance

The difference between the actual revenue earned and the expected revenue that was budgeted for a specific period.

Actual Revenue

The real income that a company generates from its business activities, reported during a specific period.

Static Planning Budget

A budget designed for a single level of activity and does not change even if the level of activity changes.