ACCT4816 Assignment #2Fall 2020

Question 1

Ms. Onmiown formally separated from her husband late in 2019. Custody of her threechildren, ages 14, 10, and 7, was granted to her as part of an agreement (properly referenced to the Income Tax Act, as necessary) that was worked out with her husband in Family Court. The oldest child, George, is 20 years old and, therefore, not part of the agreement, although he lives with her and the other children. To make a fresh start, on January 15, 2020, she resigned from her position in Elmira, Ontario, where she had been employed by the same employer since November 2002. She took a position in Dundas, Ontario, about 65 kilometres away.

Ms. Onmiown had always prepared her own tax return in previous years, but because of the extraordinary events of 2019 and 2020, she is having some difficulty with the preparation of her return. She has come to you for help, having already correctly calculated her income under Subdivisions a, b, and c of Division B, as follows:

20192020

Subdivision a

Salary (from both employers in 2020)$86,500$95,000

Taxable group term life insurance premium

(paid by both employers in 2020)450495

Taxable car benefit4,3505,000

Deductible professional fees(350)(400)

Deductible RPP contributions (defined benefit plans)(4,800)(5,500)

Net Subdivision a income$86,150$94,595

Subdivision b

Business income (loss) from partnership share

(drawings from partnership in both years: $4,000)$(1,000)$6,000

Property income:

Net rental income (loss) from apartment building

(loss is before CCA)10,050(2,000)

Grossed-up dividends from active business income of a CCPC1,1001,200

Savings Bond interest3,3003,500

Deductible interest on loan to buy shares(200)(200)

Net Subdivision b income$13,250$8,500

Subdivision c

Taxable capital gain on sale of shares$6,200$6,500

Taxable capital gain on sale of cottage8,000

Taxable capital gain on sale of painting1,200

Net Subdivision c income$6,200$15,700

Total income from above sources$ 105,600$ 118,795

Additional Information for 2020:

(1)She made a lump-sum direct transfer of $27,000 to her RRSP out of the RPP of her former employer who had made vested contributions since January 1, 2007.

(2)During 2020, she received a retiring allowance of $63,000 for long service from her previous employer.

(3)During 2020, she made the following selected expenditures:

(a)contribution to her RRSP in respect of 2020, consisting of $42,000 in January 2020 and another $14,000 in October 2020. Her employer reported a pension adjustment (PA) of $7,500 for 2019. From prior years Ms. Onmiown had carryforward room of $40,000 which she has not used up yet.

(b)legal fees

for representation in Family Court$ 2,600

for appealing an income tax assessment which she lost900

$ 3,500

(c)care for her children

food and clothing$ 6,500

babysitter for half days during 30 weeks of school term ($110 per week)3,300

babysitter for full days during 15 weeks of summer and other vacations

($105 per week)1,575

overnight summer camp for 14-year-old child for four weeks1,000

$ 12,375

(d)move to Dundas

unsuccessful trip to find accommodation

car expenses$50

hotel for two nights ($150 per night)300

meals for three days ($30 per day)90

long distance calls to realtor to find accommodation35

$475

move with family

cancellation of lease on Elmira apartment$550

hotel for two nights near Dundas after movers

packed and while household effects in transit300

meals for two days during packing and in transit200

car expenses25

transportation, packing and unpacking of household effects 3,195

$ 4,270

(e)maintenance payment for husband by virtue of agreement

made pursuant to a court order

total of monthly payments for his maintenance$ 4,800

total of monthly payments made directly to his apartment landlord3,600

$ 8,400

(4)Ms. Onmiown had net capital losses of $4,200 in 1999 which were available for carryforward.

(5)Ms. Onmiown had the following amounts withheld from her salary in 2020:

Canada Pension Plan$ 2,898

Employment Insurance856

$ 3,754

(6)Ms. Onmiown's oldest child, George, attends the University of Waterloo and paid tuition of $4,000 for eight months of full-time attendance during 2020. George earned gross employment income of $12,500 during the summer. No amounts were withheld from his pay. Ms. Onmiown's other children do not have any income.

(7)Ms. Onmiown made total contributions to registered charities of $700.

Required:

Showing all calculations, whether or not necessary to the final answer, calculate the following:

Subdivision d inclusions and Subdivision e deductions for 2020, noting briefly why any items were not used in your calculation.