Part B: 1 Comprehensive Problem. This can be done via an Excel Sheet or written clearly by hand or typed. If it is unreadable, points will be deducted.

Question 1 (50 marks)

Ms. A has come to see you, tax specialist, to prepare her 2020 personal income tax. She wants to have an in idea of what her taxable income will be. You have asked for details of the activities that occurred in 2020 and Ms. A provided you with the following:

• ⚫ Ms. A separated from her husband. She successfully took full custody of the two children, solli (5 years old) and Susan (9 years old). In addition, her uncle passed away during the year.

• ⚫ In June 2020, she was dismissed by her employer in Montreal; she had been working there

  since 1991.

• ⚫ In early September, she accepted a position in a public company called Technocom in Toronto.

  On September 15th, 2020, she moved from Montreal to Toronto and sold her house in Quebec one month later. She requested your assistance in preparing her tax return. She has provided you with the following information.

1. 2.

Gross salary from her Quebec employer Moving expenses paid by Ms. A

1. Airplane tickets for house-hunting trip (in Aug 2020)

2. Meals and lodging at destination, her new house

$100,000 $1,000

3.

$15,000
Ms. A sued her ex-husband as he stopped making support payments since January 1,

4.

2020. A judgement was rendered and her ex-husband was ordered to pay:

1. A $30,000 lump sum spousal support payment on June 30, 2020

2. Monthly spousal support of $1,500 beginning July 1, 2020

3. Monthly child support payments of $1,000, beginning July 1, 2020

However, her ex-husband only paid her the $30,000 lump sum amount and Monthly support payments of $1,500 for four months from July to Oct 2020 and no child support.

In 2020, Ms. A sold a painting for $9,000, which had cost her $500.

$8,000 c. Meals and lodging for family during travel trip (2 days) $500

wasn’t ready (20 nights)

4. Moving company, including storage of $2,000

5. Mortgage interest and real estate taxes on the Quebec

   home while it was vacant

6. Real estate commissions for selling Quebec residence

$9,000 $9,500

5. In 2020, Ms. A was granted an option from her Toronto employer to purchase 2,000 shares at $10 per share, while the FMV of the shares at the time the option was granted was $11 per share. She exercised the option and acquired all 2,000 shares in November 2020 when the share price had a FMV of $15 per share.

6. In Dec 2020, a dividend was received from her new employer. $5,000

7. She successfully sued her Quebec employer for damages and was

   paid the following amount as a severance package. $12,000

8. Gross salary from her Technocom $40,000

9. Her uncle’s employer paid a death benefit to Ms. A in 2020 $11,000

10. Ms. A lost $25,000 on the sale of her Quebec home. Her new employer reimbursed her

    for this loss. $25,000

11. Interest-free loan received on September 1, 2020 from her new employer to assist her to

    purchase her home (the prescribed rate of interest for 2020 was 2%).$80,000

12. In addition to the $6,000 paid to Nanny for childcare expenses, Ms. A also paid $20,000 for an overnight camp for 8 weeks during the summer for both children in order to focus

on her job.

13. Ms. A contributed to a RESP in 2020

14. Ms. A withdrew from her TFSA in 2020

Required

Calculate

⚫ Net income for tax purposes, 

⚫ taxable income
⚫ Carry over amounts

$26,000 $2,500 $6,000

making any elections or designations you deem necessary. Note if Ms. A is subject to any penalties, or if she has any carry over amounts. To receive full marks, you must show all calculations and note all amounts, which have a nil effect on income.