Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

( a ) Determine Cynthia s net income for tax purposes in accordance with the format of Section 3 of the Income Tax Act for

(a) Determine Cynthias net income for tax purposes in accordance with the format of Section 3 of the Income Tax Act for the 2023 taxation year. Hint: Demonstrate that you can use the Statutory Formula. If your answer is incorrect and your process is logical than there could be part marks. (5 marks)
(b) Based on your answer to part (a), calculate Cynthias federal income tax liability for the 2023 taxation year. Hint: Demonstrate that you can calculate using tax brackets and tax credits. If your answer is incorrect and your process is logical than there could be part marks. (10 Marks)
Cynthia Dale is 62 years old and retired from her employment with Lego Ltd., a Canadian public corporation, on September 30,2023.
Cynthia has asked you to help her prepare her 2023 tax return and to advise her on certain other tax matters. Information regarding her financial activities for 2023 is summarized below.
1. Cynthias gross salary, to September 30th, was $85,000. From the amount, Lego withheld CPP and EI premiums totalling $4,756, of which $631 were CPP enhanced contributions. In addition to salary, Lego paid $10,000 directly into Cynthias RRSP at a local bank.
2. Cynthia used the employers automobile unl her retirement. Lego paid the monthly lease cost of $400 plus monthly operating expenses of $200. Between January 1 and September 30, Cynthia drove the car a total of 16,000 km, of which 4,000 km were for personal use.
3. Cynthia incurred and paid medical expenses of $5,000 in the year.
4. In 2020, Lego granted Cynthia an option to acquire up to 5,000 of its shares at $8 per share. At that time, the shares were trading at the same price. In January 2023, she purchased 3,000 shares when they were trading at $10 per share. She purchased an additional 1,000 shares in July, when they were trading at $15 per share. In November, Cynthia sold 2,000 shares at $20 per share after receiving a cash dividend (eligible) of $800.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Management Accounting Information For Decision Making

Authors: Anthony A. Atkinson

7th Edition

1618533517, 9781618533517

More Books

Students also viewed these Accounting questions