Ken Potman is the sole shareholder in Brickbase Enterprises Ltd., a Regina-based construction company. In addition, Potman is a 25% partner in a retail kitchenware store, although he does not actively participate in its management. The following information relates to Potman’s financial affairs for the year 20X1:

1. Brickbase was organized three years ago. For its year ending May 31, 20X1, the company earned a profit of $88,000. Potman originally contributed $200,000 to the corporation, using $50,000 of his own savings and funding the balance with a bank loan. In return, the corporation issued Potman $1,000 worth of common shares and $199,000 of preferred shares. In 20X1, the company paid a dividend of $12,000 on the preferred shares. All of Brickbase’s income is subject to the small business deduction.

2. During the year, Potman sold a warehouse property for $180,000 (land $15,000, building $165,000). The building was used by Brickbase to store construction equipment, and the company paid Potman a fair rental for use of the property. The property was originally purchased at a cost of $140,000 (land $10,000, building $130,000). At the end of 20X0 the building had an undepreciated capital cost of $110,000.

Simultaneously with the sale, Potman purchased a larger warehouse property (constructed after March 18, 2007), which was also rented to Brickbase. The new property cost $400,000 (land $50,000, building $350,000). During the year, the company paid Potman net rents of $30,000 for both properties. The new property was financed with the proceeds from the sale of the old building as well as mortgage financing.

3. The retail store partnership earned $40,000 for its year ending December 31, 20X1.

The profit consisted of a $32,000 profit from operations and $8,000 of interest income earned on excess undistributed cash deposits.

4. Potman’s other cash receipts and disbursements for 20X1 are shown in the table below.

5. On July 1 of the previous year, Potman purchased a four-year guaranteed investment certificate for $30,000 that bears interest at 10%.The interest compounds annually but is not payable until the end of the four-year term. Potman did not include any amount of interest in his previous year’s income.

6. During the year, one of the Canadian public corporations of which Potman is a shareholder issued him 100 additional shares as a stock dividend. The shares had a stated value of $40 per share. Potman placed the shares in his safety deposit box along with his other securities.

Receipts:

Salary from Brickbase…………………………................................................…….            $62,000

Dividends from Canadian public corporations........................................…………        6,000

Dividends from foreign public corporations (net of 10% foreign withholding tax) 9,000

Winnings from provincial lottery……………….................................................………        2,000

Interest on a loan to his daughter………………...............................................…………    1,000

Disbursements:

Contribution to Brickbase employee pension plan…………  3,000

Investment counsel fees………………………………..         1,000

Legal fees for registering mortgage on new warehouse….     5,000

Life insurance premium on policy required as collateral for the bank loan used to purchase Brickbase shares……………………………………………       1,000

Interest on warehouse building mortgage…………………    21,000

Interest paid on house mortgage (The house mortgage is $100,000, of which $70,000 was used to acquire the house. The balance was used to purchase public corporation shares.) ……………………………….…………………………       10,000

Interest on bank loan (re: Brickbase shares) ……………       15,000

Donations to local charity ……………………………….      4,000

Safety deposit box fees ……………………………….       100

Required:

Determine separately, for the year 20X1, Potman’s income for tax purposes from employment, business, and property.