ASAPPP

Dr. Jaffa Lu has hired your professional services to file her income tax return. Dr. Lu is a retired surgeon. Due to her failing eyesight, Jaffa was required to retire from her occupation at a younger age than normal. Fortunately, Jaffa has more than enough income to support herself as a result of years of receiving a very large salary as a surgeon and a family inheritance. Jaffa has invested most of her past employment earnings into a large portfolio which paid the following amounts during 2020, the current year. (Click on the icon to view Part 1 of the additional information.) (Click on the icon to view Part 2 of the additional information.) Required Requirement 1. Compute Dr. Lu's net property income for 2020. das Fill in the table below to compute the net property income. (Round amounts to the nearest cent. Enter deductions with parentheses or a minus sign.) Property Income Amount Eligible dividends Ineligible dividends Interest income Foreign dividends Net rental income Carrying Charges Net property income Requirement 2. Jaffa has reviewed your calculation of net property income and she is confused. Jaffa does not understand why the dividend income included in your calculation is different than the amounts she received in the year. Describe for Jaffa the concept of integration and how this impacts the taxation of Canadian source dividends as well as the tax consequences of foreign Required 1. Compute Dr. Lu's net property income for 2020. 2. Jaffa has reviewed your calculation of net property income and she is confused. Jaffa does not understand why the dividend income included in your calculation is different than the amounts she received in the year. Describe for Jaffa the concept of integration and how this impacts the taxation of Canadian source dividends as well as the tax consequences of foreign source dividends received by an individual in Canada. 3. Jaffa informs you that she plans on selling her rental property in the near future and using a portion of the proceeds from the sale to pay off some of her debt with the bank. Jaffa would like your advice on which loans she should pay back first in order to achieve the most favourable tax consequences. 4. Prior to selling the rental property, Jaffa plans on upgrading the wood siding on the house to vinyl siding. Explain to Jaffa the difference between capitalizing and expensing costs, and indicate which treatment the siding cost should receive. 4. Prior to selling the rental property, Jaffa plans on upgrading the wood siding on the house to vinyl siding. Explain to Jaffa the difference between capitalizing and expensing costs, and indicate which treatment the siding cost should receive. 5. Explain to Jaffa the tax consequences that could occur if she sells the rental property due to the fact that she has claimed the maximum CCA on the rental property since acquisition. Requirement 1. Compute Dr. Lu's net property income for 2020. Fill in the table below to compute the net property income. (Round amounts to the nearest cent. Enter deductions with parentheses or a minus sign.) Property Income Amount Eligible dividends Ineligible dividends Interest income Foreign dividends Net rental income Carrying Charges Net property income Requirement 2. Jaffa has reviewed your calculation of net property income and she is confused. Jaffa does not understand why the dividend income included in your calculation is different than the amounts she received in the year. Describe for Jaffa the concept of integration and how this impacts the taxation of Canadian source dividends as well as the tax consequences of foreign Select all that apply. A. The "gross-up" refers to the procedure where dividend income earned by an individual from a Canadian corporation must be inflated by dividing the actual dividend by a certain fraction B. The taxable dividend income reported on Jaffa tax return will be equal to the inflated or "gross-up" dividend calculated as the actual dividend multiplied by a certain fraction. C. The "gross-up" refers to the procedure where dividend income earned by an individual from a Canadian corporation must be inflated by multiplying the actual dividend by a certain fraction D. The taxable dividend income reported on Jaffa tax return will be equal to the inflated or "gross-up" dividend calculated as the actual dividend divided by a certain fraction. a Requirement 3. Jaffa informs you that she plans on selling her rental property in the near future and using a portion of the proceeds from the sale to pay off some of her debt with the bank. Jaffa would like your advice on which loans she should pay back first in order to achieve the most favourable tax consequences. Choose the correct answer Choose the correct answer. O A. Jaffa should use the proceeds from the sale of the rental property to repay her personal mortgage or her personal car loan rather than the loan she used to purchase mutual funds. B. Jaffa should use the proceeds from the sale of the rental property to repay her personal car loan rather than the loan she used to purchase mutual funds or her personal mortgage. O C. Jaffa should use the proceeds from the sale of the rental to repay the loan she used to purchase mutual funds rather than her personal car loan or her personal mortgage. OD. Jaffa should use the proceeds from the sale of the rental property to repay her personal mortgage and the loan she used to purchase muual funds rather than her personal car loan Requirement 4. Prior to selling the rental property, Jaffa plans on upgrading the wood siding on the house to vinyl siding. Explain to Jaffa the difference between capitalizing and expensing costs, and indicate which treatment the siding cost should receive. Select all that apply Requirement 4. Prior to selling the rental propery, Janta pians on upgrading the wood siding on the house to vinyl siding. Explain to Jaffa the difference between capitalizing and expensing costs and indicate which treatment the siding cost should receive. Select all that apply. A. Repairs and maintenance expenses are larger but less frequent costs that improve the value of the property B. Generally, repairs and maintenance expenses are smaller, more frequent, expenses that restore the property to its previous condition but do not materially improve the property. C. Capital expenditures are any'expense that have an enduring value, increase the useful life of the rental property, or relate to the purchase of a separate asset. D. Since repairs and maintenance expenses are fully deductible against rental income, capital expenditures are also deductible. E. Although repairs and maintenance expenses are fully deductible against rental income, capital expenditures are not deductible. OF. In Jaffa's case, the cost of upgrading the wood siding to vinyl siding on the rental property would be considered a capital expenditure as siding will have enduring value (it will last for several taxation years) and it improves the quality of the rental property beyond its Requirement 5. Explain to Jaffa the tax consequences that could occur if she sells the rental property due to the fact that she has claimed the maximum CCA on the rental property since acquisition Select all that apply. A. Since the real estate property is decreasing in value, Jaffa will trigger recapture on the sale of her rental property because the value of the property is less than the high UCC balance. B. Since real estate property has the potential to increase in value over time, Jaffa could likely trigger recapture and capital gains on the sale of her rental property. C. The sale of the property could trigger recapture (in addition to a capital gain) if the property was sold for proceeds of disposition that exceed the capital cost of the property. D. Recapture on the disposition of rental property would not be included as taxable income on the Jaffa's income tax return. Additional info (part 1) Amount $22,500 Item Dividends from public Canadian corporations (subject to high corporate tax rates): Dividends from private Canadian corporatins (subject to low corporate tax rates): Interest income received from Canadian sources: Dividends from foreign corporations (translated into Canadian dollars): 32,500 18,000 12,700 Note: Total foreign dividends earned was $14,100 less foreign tax withheld of $1,400. Jaffa's portfolio of investments includes a five-year investment contract purchased three years ago on September 1. The investment contract has a maturity value of $ 155,000 and an annual interest rate of 3%. The total interest earned on the investment contract will be paid on maturity on September 1, 2022, two years from now. Jaffa did not receive any interest (cash) from this investment contract in 2020. Jaffa's portfolio of investments is managed by a large Canadian brokerage firm called Premium Investments Inc. ("Premium") Premium charges Jaffa investment counsel fees of $5,400 during 2020. Additional info (part 2) a In 2019, the previous year, Jaffa received a large family inheritance, which she invested into a rental property. The property was purchased in 2019, and Jaffa has claimed the maximum amount of capital cost allowance (CCA) on the property in 2019. In 2020, the opening UCC balance in CCA Class 1 for the rental building is $345,000 and Jaffa would like to claim the maximum CCA deduction on the rental income in 2020. The rental income and expense information for 2020 is as follows. Item Rental income: Property tax: Property insurance: Property management fees: Utilities: Repair of a leaky faucet and water damage: Amount $2,650 per month 4,600 for the year 150 per month 170 per month 640 per month 1,200 To assist with filing her tax return, Jaffa provides you with detailed records from her bank. The documents indicate that Jaffa has borrowed the following amounts from her bank. $195,000 mortgage on the rental property with principal repayments totalling $14,000 and interest payments of $7,100 for 2020 $385,000 mortgage on Dr. Lu's personal home with principal repayments totalling $18,500 and interest payments of $7,800 for 2020 $160,000 loan used to purchase mutual funds with Premium Investments Inc. Jaffa paid interest of $5,100 on this loan during 2020. $46,000 loan used to purchase Jaffa's personal use vehicle. Jaffa paid $2,390 of interest on this loan during 2020. Dr. Jaffa Lu has hired your professional services to file her income tax return. Dr. Lu is a retired surgeon. Due to her failing eyesight, Jaffa was required to retire from her occupation at a younger age than normal. Fortunately, Jaffa has more than enough income to support herself as a result of years of receiving a very large salary as a surgeon and a family inheritance. Jaffa has invested most of her past employment earnings into a large portfolio which paid the following amounts during 2020, the current year. (Click on the icon to view Part 1 of the additional information.) (Click on the icon to view Part 2 of the additional information.) Required Requirement 1. Compute Dr. Lu's net property income for 2020. das Fill in the table below to compute the net property income. (Round amounts to the nearest cent. Enter deductions with parentheses or a minus sign.) Property Income Amount Eligible dividends Ineligible dividends Interest income Foreign dividends Net rental income Carrying Charges Net property income Requirement 2. Jaffa has reviewed your calculation of net property income and she is confused. Jaffa does not understand why the dividend income included in your calculation is different than the amounts she received in the year. Describe for Jaffa the concept of integration and how this impacts the taxation of Canadian source dividends as well as the tax consequences of foreign Required 1. Compute Dr. Lu's net property income for 2020. 2. Jaffa has reviewed your calculation of net property income and she is confused. Jaffa does not understand why the dividend income included in your calculation is different than the amounts she received in the year. Describe for Jaffa the concept of integration and how this impacts the taxation of Canadian source dividends as well as the tax consequences of foreign source dividends received by an individual in Canada. 3. Jaffa informs you that she plans on selling her rental property in the near future and using a portion of the proceeds from the sale to pay off some of her debt with the bank. Jaffa would like your advice on which loans she should pay back first in order to achieve the most favourable tax consequences. 4. Prior to selling the rental property, Jaffa plans on upgrading the wood siding on the house to vinyl siding. Explain to Jaffa the difference between capitalizing and expensing costs, and indicate which treatment the siding cost should receive. 4. Prior to selling the rental property, Jaffa plans on upgrading the wood siding on the house to vinyl siding. Explain to Jaffa the difference between capitalizing and expensing costs, and indicate which treatment the siding cost should receive. 5. Explain to Jaffa the tax consequences that could occur if she sells the rental property due to the fact that she has claimed the maximum CCA on the rental property since acquisition. Requirement 1. Compute Dr. Lu's net property income for 2020. Fill in the table below to compute the net property income. (Round amounts to the nearest cent. Enter deductions with parentheses or a minus sign.) Property Income Amount Eligible dividends Ineligible dividends Interest income Foreign dividends Net rental income Carrying Charges Net property income Requirement 2. Jaffa has reviewed your calculation of net property income and she is confused. Jaffa does not understand why the dividend income included in your calculation is different than the amounts she received in the year. Describe for Jaffa the concept of integration and how this impacts the taxation of Canadian source dividends as well as the tax consequences of foreign Select all that apply. A. The "gross-up" refers to the procedure where dividend income earned by an individual from a Canadian corporation must be inflated by dividing the actual dividend by a certain fraction B. The taxable dividend income reported on Jaffa tax return will be equal to the inflated or "gross-up" dividend calculated as the actual dividend multiplied by a certain fraction. C. The "gross-up" refers to the procedure where dividend income earned by an individual from a Canadian corporation must be inflated by multiplying the actual dividend by a certain fraction D. The taxable dividend income reported on Jaffa tax return will be equal to the inflated or "gross-up" dividend calculated as the actual dividend divided by a certain fraction. a Requirement 3. Jaffa informs you that she plans on selling her rental property in the near future and using a portion of the proceeds from the sale to pay off some of her debt with the bank. Jaffa would like your advice on which loans she should pay back first in order to achieve the most favourable tax consequences. Choose the correct answer Choose the correct answer. O A. Jaffa should use the proceeds from the sale of the rental property to repay her personal mortgage or her personal car loan rather than the loan she used to purchase mutual funds. B. Jaffa should use the proceeds from the sale of the rental property to repay her personal car loan rather than the loan she used to purchase mutual funds or her personal mortgage. O C. Jaffa should use the proceeds from the sale of the rental to repay the loan she used to purchase mutual funds rather than her personal car loan or her personal mortgage. OD. Jaffa should use the proceeds from the sale of the rental property to repay her personal mortgage and the loan she used to purchase muual funds rather than her personal car loan Requirement 4. Prior to selling the rental property, Jaffa plans on upgrading the wood siding on the house to vinyl siding. Explain to Jaffa the difference between capitalizing and expensing costs, and indicate which treatment the siding cost should receive. Select all that apply Requirement 4. Prior to selling the rental propery, Janta pians on upgrading the wood siding on the house to vinyl siding. Explain to Jaffa the difference between capitalizing and expensing costs and indicate which treatment the siding cost should receive. Select all that apply. A. Repairs and maintenance expenses are larger but less frequent costs that improve the value of the property B. Generally, repairs and maintenance expenses are smaller, more frequent, expenses that restore the property to its previous condition but do not materially improve the property. C. Capital expenditures are any'expense that have an enduring value, increase the useful life of the rental property, or relate to the purchase of a separate asset. D. Since repairs and maintenance expenses are fully deductible against rental income, capital expenditures are also deductible. E. Although repairs and maintenance expenses are fully deductible against rental income, capital expenditures are not deductible. OF. In Jaffa's case, the cost of upgrading the wood siding to vinyl siding on the rental property would be considered a capital expenditure as siding will have enduring value (it will last for several taxation years) and it improves the quality of the rental property beyond its Requirement 5. Explain to Jaffa the tax consequences that could occur if she sells the rental property due to the fact that she has claimed the maximum CCA on the rental property since acquisition Select all that apply. A. Since the real estate property is decreasing in value, Jaffa will trigger recapture on the sale of her rental property because the value of the property is less than the high UCC balance. B. Since real estate property has the potential to increase in value over time, Jaffa could likely trigger recapture and capital gains on the sale of her rental property. C. The sale of the property could trigger recapture (in addition to a capital gain) if the property was sold for proceeds of disposition that exceed the capital cost of the property. D. Recapture on the disposition of rental property would not be included as taxable income on the Jaffa's income tax return. Additional info (part 1) Amount $22,500 Item Dividends from public Canadian corporations (subject to high corporate tax rates): Dividends from private Canadian corporatins (subject to low corporate tax rates): Interest income received from Canadian sources: Dividends from foreign corporations (translated into Canadian dollars): 32,500 18,000 12,700 Note: Total foreign dividends earned was $14,100 less foreign tax withheld of $1,400. Jaffa's portfolio of investments includes a five-year investment contract purchased three years ago on September 1. The investment contract has a maturity value of $ 155,000 and an annual interest rate of 3%. The total interest earned on the investment contract will be paid on maturity on September 1, 2022, two years from now. Jaffa did not receive any interest (cash) from this investment contract in 2020. Jaffa's portfolio of investments is managed by a large Canadian brokerage firm called Premium Investments Inc. ("Premium") Premium charges Jaffa investment counsel fees of $5,400 during 2020. Additional info (part 2) a In 2019, the previous year, Jaffa received a large family inheritance, which she invested into a rental property. The property was purchased in 2019, and Jaffa has claimed the maximum amount of capital cost allowance (CCA) on the property in 2019. In 2020, the opening UCC balance in CCA Class 1 for the rental building is $345,000 and Jaffa would like to claim the maximum CCA deduction on the rental income in 2020. The rental income and expense information for 2020 is as follows. Item Rental income: Property tax: Property insurance: Property management fees: Utilities: Repair of a leaky faucet and water damage: Amount $2,650 per month 4,600 for the year 150 per month 170 per month 640 per month 1,200 To assist with filing her tax return, Jaffa provides you with detailed records from her bank. The documents indicate that Jaffa has borrowed the following amounts from her bank. $195,000 mortgage on the rental property with principal repayments totalling $14,000 and interest payments of $7,100 for 2020 $385,000 mortgage on Dr. Lu's personal home with principal repayments totalling $18,500 and interest payments of $7,800 for 2020 $160,000 loan used to purchase mutual funds with Premium Investments Inc. Jaffa paid interest of $5,100 on this loan during 2020. $46,000 loan used to purchase Jaffa's personal use vehicle. Jaffa paid $2,390 of interest on this loan during 2020