1. A Review of Net Income for Tax Purposes Alan Active holds a job, operates a small farm, and makes numerous investments. A description of his financial activities for 2020 is given below. Alan is a lawyer and is employed in the legal department of a large public corporation. He received a gross salary of $ 96,000. In addition, the corporation provided the following items of remuneration: A car allowance of $700 a month to cover costs of travel in the performance of his duties; during 2020, Alan used his own car to travel from his home to work and back and rarely used it during working hours on company business. A contribution of $3,000 to a deferred profit-sharing plan. A group term life insurance policy for $100,000 (premium cost, $1,400). A cash bonus of $5,200 that was awarded to him in the previous year and that he received in the current year. 2. Alan's employer gives all senior executives the option to acquire a certain number of shares of the corporation at a price that is guaranteed for two years. In 2019, the employer granted Alan an option to purchase up to 5,000 of its shares for a price of $10 per share. At the time the option was granted, the shares were valued at $10.75 per share. During 2020, Alan purchased 800 shares at a cost of $10 per share. At the date of purchase, the corporation's shares were trading at $14 per share. 3. Alan purchased a small parcel of land (20 hectares) in 2020 and began raising goats. In 2020, he lost $1,000 from this operation. In 2020, Alan purchased 1,000 shares of Canadian public corporation X for $20 per share and received a stock dividend of 100 additional shares of the same class. During the year, he sold the 100 shares at $24 per share, for the same value as on their date of issue. 5. Three years ago, Alan purchased three residential rental properties and has provided you with the following information: 4. Land cost Building cost Building UCC (December 31, 2019) 2020 net rents (before CCA) Property 1 $10,000 60,000 52,000 3.000 Property 2 $ 4,000 40,000 37,000 (5,000) Property 3 $ 8,000 45,000 40,000 4,000 6. In 2020, Alan sold property 1 for $80,000 (land $12,000, building $68,000), and property 2 for $50,000 (land $6,000, building $44,000). Also, in 2020, he purchased property 4 for $90,000 (land $30,000, building $60,000). In 2020, property 4 had net rentals before capital cost allowance of $1,000 During the year, Alan gifted 1,000 shares of Shell Canada Ltd. (a public corporation) to his daughter. The shares had cost him $10 each and had a value at the time of the gift of $15 each. In 2020, his daughter (16 years old) received dividends of $4,000; she then sold the shares for $30 each. In 2020, Alan gifted 2,000 shares of Exxon Ltd. (a public corporation) to his spouse. The shares had a value of $40 each at the time of the gift. He had paid $30 per share several years before. His spouse sold the shares in 2020 for $22 per share during a market slump. Alan's mother died in 2019 and left him her house. The house cost $40,000 at the time of purchase and had a value in 2019 of $60,000. Alan sold the house in 2020 for $66,000. 7. 8. 9. Three years ago, Alan purchased 15% of the shares of two private corporations. Each carried on an active business. He sold the shares of both corporations in 2020. Information relating to the shares is as follows: PC1 PC2 Cost $46,000 $30,000 Proceeds of sale 56,000 20,000 Terms of payment $8,000/yr for 7 yrs All cash 10. In 2020, during a market slump, Alan sold 500 shares of public corporation A for $30,000; the shares had cost him $40,000. Two weeks later, as the market began to strengthen, he purchased 500 shares of the same corporation for $29,000. 11. Alan also sold the following assets in 2020: Cost Proceeds Public corporation B shares $10,000. $12,600. Public corporation C shares 47,500 14,000. Stamp collection 8,000 11,400 Jewellery 6,000. 1,000. Boat 5,000. 2,000. Stereo set 200 600. 12. Alan had the following additional receipts in 2020: Dividends from Canadian public companies $5,500 Interest on bonds 4,000 Lottery winnings 6,000 13. Alan paid out the following in 2020: To purchase a computer for use at home when working on his employer's business $1,900 Interest on bank loan to purchase shares of public corporation 5,000. Interest on house mortgage (mortgage funds of $60,000 were used -$34,000 for the purchase of the house, $26,000. for the purchase of shares) 6,000 Lump-sum alimony settlement to ex-spouse 9,000 Tuition fees for attending university 1,000 Donations 4,000 Gift to a registered federal political party 1,000 Contribution to an RRSP 2,500 Annual dues to the provincial law society 1,700 Required: Calculate Alan's net income for tax purposes for 2020. (Enter deductions with a minus sign (-). If a number should be zero, enter 0.) A Employment income S 0 Employment Income Subtotal Property income $ 0 Property Income Subtotal B Taxable Capital Gains and Allowable Capital Losses Total Capital Gains S S Total Capital losses Segment B subtotal Allowed LPP and PUP - Gains and losses S 0 Subtotal LPP and PUP transactions LPP & PUP amount allowed C Other deductions IT D S 0 Segment D Subtotal Net Income for Tax purposes S 0 1. A Review of Net Income for Tax Purposes Alan Active holds a job, operates a small farm, and makes numerous investments. A description of his financial activities for 2020 is given below. Alan is a lawyer and is employed in the legal department of a large public corporation. He received a gross salary of $ 96,000. In addition, the corporation provided the following items of remuneration: A car allowance of $700 a month to cover costs of travel in the performance of his duties; during 2020, Alan used his own car to travel from his home to work and back and rarely used it during working hours on company business. A contribution of $3,000 to a deferred profit-sharing plan. A group term life insurance policy for $100,000 (premium cost, $1,400). A cash bonus of $5,200 that was awarded to him in the previous year and that he received in the current year. 2. Alan's employer gives all senior executives the option to acquire a certain number of shares of the corporation at a price that is guaranteed for two years. In 2019, the employer granted Alan an option to purchase up to 5,000 of its shares for a price of $10 per share. At the time the option was granted, the shares were valued at $10.75 per share. During 2020, Alan purchased 800 shares at a cost of $10 per share. At the date of purchase, the corporation's shares were trading at $14 per share. 3. Alan purchased a small parcel of land (20 hectares) in 2020 and began raising goats. In 2020, he lost $1,000 from this operation. In 2020, Alan purchased 1,000 shares of Canadian public corporation X for $20 per share and received a stock dividend of 100 additional shares of the same class. During the year, he sold the 100 shares at $24 per share, for the same value as on their date of issue. 5. Three years ago, Alan purchased three residential rental properties and has provided you with the following information: 4. Land cost Building cost Building UCC (December 31, 2019) 2020 net rents (before CCA) Property 1 $10,000 60,000 52,000 3.000 Property 2 $ 4,000 40,000 37,000 (5,000) Property 3 $ 8,000 45,000 40,000 4,000 6. In 2020, Alan sold property 1 for $80,000 (land $12,000, building $68,000), and property 2 for $50,000 (land $6,000, building $44,000). Also, in 2020, he purchased property 4 for $90,000 (land $30,000, building $60,000). In 2020, property 4 had net rentals before capital cost allowance of $1,000 During the year, Alan gifted 1,000 shares of Shell Canada Ltd. (a public corporation) to his daughter. The shares had cost him $10 each and had a value at the time of the gift of $15 each. In 2020, his daughter (16 years old) received dividends of $4,000; she then sold the shares for $30 each. In 2020, Alan gifted 2,000 shares of Exxon Ltd. (a public corporation) to his spouse. The shares had a value of $40 each at the time of the gift. He had paid $30 per share several years before. His spouse sold the shares in 2020 for $22 per share during a market slump. Alan's mother died in 2019 and left him her house. The house cost $40,000 at the time of purchase and had a value in 2019 of $60,000. Alan sold the house in 2020 for $66,000. 7. 8. 9. Three years ago, Alan purchased 15% of the shares of two private corporations. Each carried on an active business. He sold the shares of both corporations in 2020. Information relating to the shares is as follows: PC1 PC2 Cost $46,000 $30,000 Proceeds of sale 56,000 20,000 Terms of payment $8,000/yr for 7 yrs All cash 10. In 2020, during a market slump, Alan sold 500 shares of public corporation A for $30,000; the shares had cost him $40,000. Two weeks later, as the market began to strengthen, he purchased 500 shares of the same corporation for $29,000. 11. Alan also sold the following assets in 2020: Cost Proceeds Public corporation B shares $10,000. $12,600. Public corporation C shares 47,500 14,000. Stamp collection 8,000 11,400 Jewellery 6,000. 1,000. Boat 5,000. 2,000. Stereo set 200 600. 12. Alan had the following additional receipts in 2020: Dividends from Canadian public companies $5,500 Interest on bonds 4,000 Lottery winnings 6,000 13. Alan paid out the following in 2020: To purchase a computer for use at home when working on his employer's business $1,900 Interest on bank loan to purchase shares of public corporation 5,000. Interest on house mortgage (mortgage funds of $60,000 were used -$34,000 for the purchase of the house, $26,000. for the purchase of shares) 6,000 Lump-sum alimony settlement to ex-spouse 9,000 Tuition fees for attending university 1,000 Donations 4,000 Gift to a registered federal political party 1,000 Contribution to an RRSP 2,500 Annual dues to the provincial law society 1,700 Required: Calculate Alan's net income for tax purposes for 2020. (Enter deductions with a minus sign (-). If a number should be zero, enter 0.) A Employment income S 0 Employment Income Subtotal Property income $ 0 Property Income Subtotal B Taxable Capital Gains and Allowable Capital Losses Total Capital Gains S S Total Capital losses Segment B subtotal Allowed LPP and PUP - Gains and losses S 0 Subtotal LPP and PUP transactions LPP & PUP amount allowed C Other deductions IT D S 0 Segment D Subtotal Net Income for Tax purposes S 0