2020 T1

Purpose: To become familiar with how bookkeeping and financial statement information relating to a personal business and a rental property is used in completing a personal T1 income tax return. Objective: To complete and prepare the required income tax returns using the information and facts provided below. This assignment relates to the following Course Learning Requirements: CLR 3 - Complete basic personal tax return using tax preparation software CLR 4 - Develop a working knowledge and understanding of the rules underlying the computation of taxable income and taxes payable for individuals CLR 5 - Demonstrate knowledge of financial statements by collecting and categorizing transactions using Excel Instructions: Complete the 2020 T1 Income Tax Returns for yourself and your spouse, Jean, based on the information provided below. You are to enter your name and your student number as the SIN #. You are married to Jean, whose SIN #is 888-888-888. You were born on April 16, 1970 and he/she was born on September 1, 1969. You live on 123 Anywhere Street, Ottawa, Ontario, K2P OGS. Your phone number is 613-555-1212. You have 2 children: Julia, born on April 4, 2008. She has no SIN #. Amanda, born on June 25, 2004. Her SIN # is 333-333-333. You do not work as an employee, you own 90% of Faster Than Fast Running Emporium and have some investment income (see attached T3) from AIC. You also have a joint bank account with BMO whereby you and your spouse are to split the income 50/50. Both spouses are Canadian citizens and have no foreign property. Spouse: Jean works full time as teacher at the OCDSB. His/her T-4 is attached. He/she also has investment income with Alterna Trust (see attached T-5). Business: You own Faster Than Fast Running Emporium, an unincorporated retail store 90% by you and 10% by your spouse. This is the first year of operations and you have had an exceptionally profitable year. Details of the revenues, expenses and capital assets are detailed on the attached schedule. The industry code is 448150 and you should use the home address as the business address. Rental: You also have a two rental properties (both 100% owned by yourself). The details are outlined in the attached Information. Capital gains: During the year, you disposed of the following capital assets: 1. Scotiabank shares - on June 25, 2020, you sold 100 shares at $50 each. A $25 broker's commission was deducted from your sale proceeds. You had originally purchased 100 shares at$40 per share on June 14, 2008. 2. Your spouse sold a cottage, located in Ontario, for $180,000 on November 17, 2020. On the sale, they paid legal fees and real estate commissions totaling $8,250. Your spouse also had originally bought it in 2002 for$160,000. The address of the property is 125 Santa Street, North Pole, Ontario, HOH OHO. Faster Than Fast Running Emporium Financial Information for the Year Ended December 31, 2020 575,000 Sales Cost of Goods Sold Opening Inventory Purchases Freight in Less: Closing Inventory Gross Profit 410,000 2,650 40,000 372,650 202,350 Operating Expenses Rent Salaries (Note 2) Utilities Advertising Meals and entertainment (Note 3) Travel (running trade show) Personal membership to Royal Ottawa Golf Club Travel (family vacation to Florida) Insurance Depreciation Automobile costs (Note 1) Telephone Interest on late payments to CRA Accounting fees Interest on business loan Bad debts Total operation expenses 40,000 96,254 2,560 3,350 6,000 3,650 4,500 4,800 2,255 6,250 6,401 2,915 166 1,200 3,610 350 184,261 18,089 Net Income Note 1 - Automobile Costs On January 2, 2020, the business leased a new Mercedes with a manufacturer's list price of $66,000. The monthly lease payments are $805 and the term of the lease is 4 years. The business kms were 1,165 out of a total of 32,410 kms. They incurred the following costs: Fuel Repairs Insurance License 3,222 1,450 1,655 74 6,401 Hint: These amounts should be entered on line 9281 in form T2125. Double clicking on this box will bring you to the motor vehicle expense worksheet. Ensure that you indicate that the auto is owned by the business in the Allocation of Expenses section at the top of the worksheet. Note 2 - Salaries This amount includes the $8,800 paid to your daughter Amanda who helps out as a sales clerk in the store. Note 3 - Meals and Entertainment The company spent $4,000 on meals, $1,000 for a company plenie for all the employees. It also spent $1,000 for tickets (January and February) to see the Ottawa Senators. Capital Assets: The had the following capital assets (all purchased during the years 1. Class 10 - purchased a delivery truck on January 2, 2020 for $18,800 2. Class 8 - purchased store fixtures on January 2, 2020 for $14,000 3. Class 13 - The company entered into the lease on January 1, 2020 at a rate of $40,000 per year for 5 years, plus a 2 year option period. At that time, it spent $30,000 on leasehold improvements. Business in home: Area for business use Total area of house 300 2,600 Heat Electricity Insurance Maintenance Mortgage interest Property taxes 3,165 2.244 975 1,022 8,880 4,145 Rental information: There are two rental properties: 1243 Lundy Lane, Ottawa ON 385 Simco Street, Toronto Units 1 house 4 apartments Income $1,000/mth $4,500/mth Rental Expenses: Advertising Insurance Interest Office Legal and accounting Maintenance and repairs Salary to daughter (helped with the books) Property taxes 350 1,800 3,588 250 1,200 6,523 1,200 32,888 Purpose: To become familiar with how bookkeeping and financial statement information relating to a personal business and a rental property is used in completing a personal T1 income tax return. Objective: To complete and prepare the required income tax returns using the information and facts provided below. This assignment relates to the following Course Learning Requirements: CLR 3 - Complete basic personal tax return using tax preparation software CLR 4 - Develop a working knowledge and understanding of the rules underlying the computation of taxable income and taxes payable for individuals CLR 5 - Demonstrate knowledge of financial statements by collecting and categorizing transactions using Excel Instructions: Complete the 2020 T1 Income Tax Returns for yourself and your spouse, Jean, based on the information provided below. You are to enter your name and your student number as the SIN #. You are married to Jean, whose SIN #is 888-888-888. You were born on April 16, 1970 and he/she was born on September 1, 1969. You live on 123 Anywhere Street, Ottawa, Ontario, K2P OGS. Your phone number is 613-555-1212. You have 2 children: Julia, born on April 4, 2008. She has no SIN #. Amanda, born on June 25, 2004. Her SIN # is 333-333-333. You do not work as an employee, you own 90% of Faster Than Fast Running Emporium and have some investment income (see attached T3) from AIC. You also have a joint bank account with BMO whereby you and your spouse are to split the income 50/50. Both spouses are Canadian citizens and have no foreign property. Spouse: Jean works full time as teacher at the OCDSB. His/her T-4 is attached. He/she also has investment income with Alterna Trust (see attached T-5). Business: You own Faster Than Fast Running Emporium, an unincorporated retail store 90% by you and 10% by your spouse. This is the first year of operations and you have had an exceptionally profitable year. Details of the revenues, expenses and capital assets are detailed on the attached schedule. The industry code is 448150 and you should use the home address as the business address. Rental: You also have a two rental properties (both 100% owned by yourself). The details are outlined in the attached Information. Capital gains: During the year, you disposed of the following capital assets: 1. Scotiabank shares - on June 25, 2020, you sold 100 shares at $50 each. A $25 broker's commission was deducted from your sale proceeds. You had originally purchased 100 shares at$40 per share on June 14, 2008. 2. Your spouse sold a cottage, located in Ontario, for $180,000 on November 17, 2020. On the sale, they paid legal fees and real estate commissions totaling $8,250. Your spouse also had originally bought it in 2002 for$160,000. The address of the property is 125 Santa Street, North Pole, Ontario, HOH OHO. Faster Than Fast Running Emporium Financial Information for the Year Ended December 31, 2020 575,000 Sales Cost of Goods Sold Opening Inventory Purchases Freight in Less: Closing Inventory Gross Profit 410,000 2,650 40,000 372,650 202,350 Operating Expenses Rent Salaries (Note 2) Utilities Advertising Meals and entertainment (Note 3) Travel (running trade show) Personal membership to Royal Ottawa Golf Club Travel (family vacation to Florida) Insurance Depreciation Automobile costs (Note 1) Telephone Interest on late payments to CRA Accounting fees Interest on business loan Bad debts Total operation expenses 40,000 96,254 2,560 3,350 6,000 3,650 4,500 4,800 2,255 6,250 6,401 2,915 166 1,200 3,610 350 184,261 18,089 Net Income Note 1 - Automobile Costs On January 2, 2020, the business leased a new Mercedes with a manufacturer's list price of $66,000. The monthly lease payments are $805 and the term of the lease is 4 years. The business kms were 1,165 out of a total of 32,410 kms. They incurred the following costs: Fuel Repairs Insurance License 3,222 1,450 1,655 74 6,401 Hint: These amounts should be entered on line 9281 in form T2125. Double clicking on this box will bring you to the motor vehicle expense worksheet. Ensure that you indicate that the auto is owned by the business in the Allocation of Expenses section at the top of the worksheet. Note 2 - Salaries This amount includes the $8,800 paid to your daughter Amanda who helps out as a sales clerk in the store. Note 3 - Meals and Entertainment The company spent $4,000 on meals, $1,000 for a company plenie for all the employees. It also spent $1,000 for tickets (January and February) to see the Ottawa Senators. Capital Assets: The had the following capital assets (all purchased during the years 1. Class 10 - purchased a delivery truck on January 2, 2020 for $18,800 2. Class 8 - purchased store fixtures on January 2, 2020 for $14,000 3. Class 13 - The company entered into the lease on January 1, 2020 at a rate of $40,000 per year for 5 years, plus a 2 year option period. At that time, it spent $30,000 on leasehold improvements. Business in home: Area for business use Total area of house 300 2,600 Heat Electricity Insurance Maintenance Mortgage interest Property taxes 3,165 2.244 975 1,022 8,880 4,145 Rental information: There are two rental properties: 1243 Lundy Lane, Ottawa ON 385 Simco Street, Toronto Units 1 house 4 apartments Income $1,000/mth $4,500/mth Rental Expenses: Advertising Insurance Interest Office Legal and accounting Maintenance and repairs Salary to daughter (helped with the books) Property taxes 350 1,800 3,588 250 1,200 6,523 1,200 32,888