Andy Surnak is employed by Jupiter Technologies Inc. (JTI), a Canadian public corporation. Andy has requested your assistance in preparing his 2020 income tax return and your advice on certain other tax matters.

Information regarding Andy’s financial activities for 2020 is outlined in Exhibit 3-1. Selected information from his 2019 tax return is provided in Exhibit 3-2.

Exhibit 3-1

ANDY
2020 Financial Information

1. In 2020, Andy received a salary of $80,000. From this income, JTI deducted income tax of $18,000 and the maximum CPP and EI. The company contributed a $500 premium to a group sickness and accident plan, $700 to a private health insurance premium, and $600 to a provincial health plan premium on his behalf.

2. The company paid him an allowance of $1,500 for general employment-related expenses. He used $1,000 to purchase a notebook computer that is mainly used for employment-related work. He spent $500 on a stock trading course.

3. He went on a business trip to the United States with his spouse. The total cost of the trip was $2,200 ($1,100 each) and was paid by JTI. Although his spouse was not part of the company, she spent 25% of her time on business-related activities by helping her husband.

4. Andy is required to use his own automobile for employment purposes. His employer has signed a T2200 for him in this respect. He was given $2,000 as an auto allowance in 2020. He travelled a total of 20,000 km, of which 9,000 km were for employment purposes. His total operating cost for this year was $4,000 and on December 31, 2019, the undepreciated capital cost allowance balance was $10,000.

5. According to his employment contract, he was required to carry out his duties away from his employer’s place of business. JTI paid him a monthly allowance of $500 ($6,000 for the year) for his out-of-town travel. In 2020, he spent $7,000 for work-related hotels and airfare.

6. Andy owned a rental property in the city. He purchased this property in 2005 at a cost of $120,000. The undepreciated capital cost balance of the building was $85,000 on December 31, 2019. In 2020, he received $12,000 as rent and paid the following expenses: interest – $6,000, property tax – $2,000, other eligible expenses – $3,000.

7. On December 15, 2020, he sold 1,000 units of a mutual fund for $15,000. He bought these funds in December 2010 for $10,000. In July 2020, he was informed by the mutual fund company that his share of the fund’s eligible dividend was $300 and the taxable capital gain was $500 but no cash distribution was made as it was reinvested automatically in the fund.

8. In November 2020, he gifted a painting valued at $3,000 to his niece on her 15th birthday. He acquired this painting in 2005 for $500. In December 2020, his niece sold this painting for $3,500.

9. In 2020, Andy had the following other receipts and disbursements: Donation to a registered federal political party $ 500; RRSP contribution $ 11,000; Eye glass expenses for the whole family $ 2,700.

10. Andy’s spouse is a teacher and earned $60,000 in 2020. They have a daughter aged 19 who works at a local coffee shop.

11. He received a dividend of $1,000 from the active business income of a CCPC. He also received $1,800 (net of $200 withholding tax) from a U.S. company. He paid $200 to an investment advisor for advice regarding an RRSP investment.

12. He sold a collection of stamps for $2,500 on October 1, 2020. He won this collection in a lottery in 2005. The fair market value of this collection was estimated at $800 at the time of winning.

13. He is trying to establish his own business. In 2020, he started a consulting business as a sole proprietor on weekends. His gross revenues for this business were $3,000 and operating expenses were $5,000. His other expenses included a golf club membership fee of $2,000 to find the potential clients and $3,000 home office expenses related to the business. He used a portion of his house as his principal place of business.

14. Andy owns 10,000 shares of Publix Inc., a publicly traded Canadian corporation. These shares were acquired at a cost, including brokerage fees, of $125,000. Based on current trading values, the shares are now worth $175,000. Andy’s daughter will be attending university next year out of town and he wants her to be safe off campus and suggests purchasing a condominium. Andy gifts the shares to his daughter who in turn sells the shares and uses the proceeds to finance the condominium purchase.

15. Andy’s 75 year old mother moved in with him and his family in September 2020. Her health has been declining over the past year and Andy suggested she stay with them to be closer to family.

16. Several years ago, Andy received options to acquire 250 common shares of JTI at a price of $25/share. When the options were granted, the common shares were trading at $25/share. During 2020, Andy exercised all of these options. On the exercise date, the shares are trading at $32/share. Andy still held the shares at December 31, 2020.

1. Calculate Andy’s minimum net income for tax purposes in accordance with the ordering provisions found in section 3 of the Income Tax Act, and his minimum taxable income for the 2020 taxation year.

2. Based on your answer to part (a), calculate Andy’s minimum federal income tax for the 2020 taxation year. Show all calculations.
    

Exhibit 3-2 2019 Tax Return Details Listed Personal Property Losses - Carry forward from 2019 Registered Retirement Savings Plan: Deduction limit from previous years' Notice of (Re) Assessment Maximum RRSP Deduction Available Net Capital Losses - Carry forward from 2019 $2,000 $10,000 $10,000 $10,000