AP 10-8 (Comprehensive Case Covering Chapters 1 to 10) Family Information Roland Sorter has been married to Rachel since their graduation from university. They have two healthy children: Richard Their son, Richard, is 14 years old. He has 2021 net income from part-time jobs of $2,300 Roxanne Their daughter, Roxanne, is 11 years old. Her 2021 net income, also from part-time jobs, is $3,600. The family's medical expenses, all paid for by Rachel, are as follows: Prescription glasses for Roland $ 625 Rhinoplasty for Rachel (see Rachel's business income) 9,350 Physiotherapy fees for Richard and Roxanne 1,475 Dental braces for Richard 8,560 Psychologist consulting fees for Roxanne 2,450 Total $22,460 During 2021, Roland worked 225 hours as a voluntary firefighter. He did not receive any com- pensation for his work. Rachel's Business Income Rachel is a lawyer who carries on a professional practice as a sole proprietor. The business has a December 31 fiscal year end. During 2021, Rachel's revenues totalled $411,000. The business operates out of a building that Rachel purchased for this purpose in 2017. The building was acquired for $675,000, of which $175,000 reflected the estimated FMV of the land. When pur- chased, the building was new, and an election was filed to include it in a separate class 1. Rachel's practice uses all of the building. On January 1, 2021, the building had a UCC value of $433,521. During 2021, Rachel renovated her offices, replacing the old furniture and fixtures with new furniture and fixtures at a cost of $67,000. The furniture and foxtures that were sold had a capital cost of $29,500 and a carrying value of $13,000. They were sold for $13,000. The January 1, 2021, UCC was $13,594 During 2021, Rachel acquired other depreciable property as follows: A client list from a retiring lawyer for $23,000 A new laptop computer for $1,400 Applications software for $3,600 As she offers mobile legal services as part of her practice, Rachel uses an automobile in her business. She retired her previous automobile at the end of 2020, and on January 1, 2021, she acquired a new BMW for $53,000. During 2021, it was driven 21,000 kilometres, 3,000 of which were for personal use and 18,000 for business use. Operating costs for the automobile during 2021 totalled $4,200 Other 2021 costs of operating her business, determined on an accrual basis, are as follows Building operating costs $29,400 Salaries and wages 53,200 Office costs 21,800 Meals with clients 8,600 Roland's Employment Income Roland works for a large Canadian public company. His 2021 salary is $86,500, none of which involves commissions. His employer withholds the following amounts during the year. Registered pension plan contributions $2,300 El premiums 890 CPP contributions 3,166 Union dues 460 *Roland's employer makes a matching contribution of $2,300. Roland's work requires some amount of travel. He uses his own automobile for this travel. The automobile was acquired on January 1, 2021, at a cost of $29,500. During 2021, he drove the vehicle 28,000 kilometres, of which 22.600 were employment related and 5.400 for personal purposes. His total operating costs for the year were $5,600 In addition to automobile costs, Roland has other travel costs as follows: Hotels $2,800 Food on overnight out of town trios 930 In addition to his salary, Roland's employer provides him with two separate allowances. The allowance for out of town travel is based on a certain standard of accomodation based on indus- try standards. The two allowances provided are as follows: Hotels and out of town meals $3,800 Use of personal automobile ($700 per month 8,400 Investment Information All of the investments are owned by Rachel as they were purchased with her own funds. During 2021, these investments produced the following amounts of income Capital gains on the sale of public company shares $12.750 Eligible dividends 11,500 Interest income 6,300 Total $30,550 Roland has no investment income for 2022 RRSP Information Roland and Rachel have both made contributions on a regular basis in RASPs. Information related to these plans is as follows: Rachel's Plan At the beginning of 2021 there was $6.500 of unused deduction room in Rachel's plan. Due to her decreased income in 2020, she did not deduct all of her RRSP contributions. As of January 1, 2021, there was 88,800 in undeducted contributions. During 2021, Rachel contributes an additional $14,500 to her plan Rachel's 2020 earned income for RRSP purposes was $116,000. She did not have a pension adjustment She would like to take the maximum deduction that is available on the basis of this information 595 Retirement Savings and Other Special Income Arrangements Assignment Problems Three years earlier, during 2018, Rachel withdrew $18,000 from her RRSP under the provisions of the Home Buyers' Plan. Due to an error on her part she did not designate any of her RRSP contributions as repayments of the HBP funds in either 2020 or 2021. Roland's Plan At the beginning of 2021, Roland had unused deduction room in his plan of $5,500. He had no undeducted contributions. During 2021, Roland contributes $4,500 to his plan. He plans to take the maximum deduction available for 2021 At the beginning of 2021, after lengthy negotiations with his union, Roland's employer agrees to increase the benefit formula in the company's defined benefit plan. The annual benefit will be increased from 1.75% to 2.0% of pensionable earnings. This change will be applied retroactively to the years 2019 and 2020. Roland has been a member of the plan for over 10 years. His pensionable earnings during the retroactive years were as follows: Year Pensionable Earnings 2019 $37,000 2020 42,000 Roland's 2020 earned income for RRSP purposes was $48,000. His employer reported a PA for that year of $4,100. Roland and Rachel will allocate tax credits between them to minimize the family's tax liability where possible. Where either spouse can claim the credit and it makes no difference in the combined tax payable, Rachel will claim the credit. Required: Ignore GST/HST & PST considerations in your solution. A Determine Rachel's 2021 net and taxable income. B. Determine Rachel's federal income tax payable and her CPP liability for 2021. C. Determine Roland's 2021 net and taxable income. D. Determine Roland's federal income tax payable for 2021.