Question
A group term life insurance policy for $100,000 (premium cost, $800). A cash bonus of $3,000 that was awarded to him in the previous year
- A group term life insurance policy for $100,000 (premium cost, $800).
- A cash bonus of $3,000 that was awarded to him in the previous year and that he received in the current year.
- Alans 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 2020, 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 2021, Alan purchased 500 shares at a cost of $10 per share. At the date of purchase, the corporations shares were trading at $14 per share.
- Alan purchased a small parcel of land (20 hectares) in 2021 and began raising goats. In 2021, he lost $1,000 from this operation.
- In 2021, 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 $21 per share, for the same value as on their date of issue.
- Three years ago, Alan purchased three residential rental properties and has provided you with the following information:
| Property 1 | Property 2 | Property 3 | ||||||
Land cost | $ | 10,000 |
| $ | 4,000 |
| $ | 8,000 |
|
Building cost |
| 60,000 |
|
| 40,000 |
|
| 45,000 |
|
Building UCC (December 31, 2020) |
| 52,000 |
|
| 37,000 |
|
| 40,000 |
|
2021 net rents (before CCA) |
| 3,000 |
|
| (5,000 | ) |
| 4,000 |
|
In 2021, 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 2021, he purchased property 4 for $90,000 (land - $30,000, building - $60,000). In 2021, 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 $12 each. In 2021, his daughter (16 years old) received dividends of $1,000; she then sold the shares for $30 each.
- In 2021, 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 2021 for $28 per share during a market slump.
- Alans mother died in 2020 and left him her house. The house cost $40,000 at the time of purchase and had a value in 2020 of $60,000. Alan sold the house in 2021 for $66,000.
- 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 2021. Information relating to the shares is as follows:
| PC 1 | PC 2 | ||||
Cost | $ | 40,000 |
| $ | 35,000 |
|
Proceeds of sale |
| 56,000 |
|
| 20,000 |
|
Terms of payment | $ | 8,000 | /yr for 7 yrs | All cash |
- In 2021, 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.
- Alan also sold the following assets in 2021:
| Cost | Proceeds | ||||
Public corporation B shares | $ | 10,000 |
| $ | 12,000 |
|
Public corporation C shares |
| 47,500 |
|
| 20,000 |
|
Stamp collection |
| 8,000 |
|
| 12,000 |
|
Jewellery |
| 6,000 |
|
| 1,000 |
|
Boat |
| 5,000 |
|
| 2,000 |
|
Stereo set |
| 800 |
|
| 900 |
|
- Alan had the following additional receipts in 2021:
Dividends from Canadian public companies | $ | 4,000 |
Interest on bonds |
| 1,000 |
Lottery winnings |
| 6,000 |
13. Alan paid out the following in 2021:
To purchase a computer for use at home when working on |
|
|
his employers business | $ | 1,900 |
Interest on bank loan to purchase shares of public corporation |
| 2,000 |
Interest on house mortgage (mortgage funds of $60,000 were used |
|
|
40,000 for the purchase of the house, $20,000. 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 |
| 2,800 |
Annual dues to the provincial law society |
| 1,000 |
Required: Calculate Alans net income for tax purposes for 2021. (Enter deductions with a minus sign (-). If a number should be zero, enter 0.)
A Employment income Salary $ 0 Employment Income Subtotal Property income Property Income Subtotal $ 0 B Taxable Capital Gains and Allowable Capital Losses Total Capital Gains $ 0 $ 0 Total Capital losses Segment B subtotal Allowed LPP and PUP - Gains and losses Subtotal LPP and PUP transactions $ 0 LPP & PUP amount allowed C Other deductions D Segment D Subtotal $ 0 Net Income for Tax purposes $ A Employment income Salary $ 0 Employment Income Subtotal Property income Property Income Subtotal $ 0 B Taxable Capital Gains and Allowable Capital Losses Total Capital Gains $ 0 $ 0 Total Capital losses Segment B subtotal Allowed LPP and PUP - Gains and losses Subtotal LPP and PUP transactions $ 0 LPP & PUP amount allowed C Other deductions D Segment D Subtotal $ 0 Net Income for Tax purposes $Step by Step Solution
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