Assignment 1 covers material from Modules 1 to 3, and it is a comprehensive question that will also give you an opportunity to review information you may have first learned in an introductory income tax course. If you have difficulty completing this assignment, go back and closely review the assigned material again.

Assignment Question

Mr. Allen Arnold lives in Burlington, Ontario. He is 38 years old. His spouse Brenda is 32 years old and has 2022 net income of $8,500. They have two children both of whom are in perfect health. Their daughter Sarah is 12 and has net income from part time jobs of $300. Their son Derek is 10 and has no income of his own.

Mr. Arnold works for a large public company and, in 2022, his basic salary is $103040 and he earns commission income of $26,140. In 2022, his employer makes the following payroll withholdings:

RPP Contributions	$4,200
CPP Contributions	3,166
EI Premiums	890
Donations to Registered Charities	1,200
Union Dues	260
Payments for personal use of company car	600
Premiums to company's disability insurance plan	1,200

Other Information

Mr. Arnolds employer makes a matching $4,200 contribution to the companys RPP on behalf of Mr. Arnold.

Mr. Arnolds employer makes a matching $1,200 contribution to the companys disability insurance plan on behalf of Mr. Arnold. The comprehensive disability insurance plan provides periodic benefits during any period of disability to compensate for lost employment income. Due to a two-month sick leave, Mr. Arnold receives disability insurance benefits of $10,950. Mr. Arnold has been making a $1,200 contribution each year since 2018. He has had no disability insurance claims in any of the years 2018 to 2020.

Mr. Arnolds employer provides him with an automobile that was purchased in 2018 for $38,000. His employer pays all of the operating expenses which, in 20XX totalled $9,800. During the year, Mr. Arnold drove the car a total of 48,000 kilometers, 42,000 of which were for employment use with 6,000 for personal use. The automobile was only available to Mr. Arnold's for 10 months of the year.

Medical expenses for Mr. Arnold's family are as follows:

Allen	$ 3,650
Brenda	2,600
Sarah	1,300
Derek	6,200

Mr. Arnold is required to maintain an office in his home without reimbursement from his employer. His employer provides the required T2200 form. He uses 20% of the homes usable floor space for his office. The home office expenses are:

Utilities and Maintenance	$ 5,000
Insurance	4,500
Property Taxes	7,600
Mortgage Interest	9,600

Mr. Arnold receives an annual travel allowance of $4,800 to cover hotel costs while travelling for employment purposes. His actual hotel costs for 20XX were $5,100. In addition, he spent $6,300 on client meals and entertainment. His employer does not reimburse any of these expenses.

As with all of the other employees, Mr. Arnold received a $750 gift certificate for use at a local department store. He also received a $300 cash reward for sales performance in 20XX.

Mr. Arnold has capital gains and capital losses from stock market trading. His gains included $ 2,350 from the sale of Microsoft shares on January 20, $1,000 from the sale of Apple shares on March 24, and $5,000 loss from the sale of Teck shares which he sold on August 1. He has incurred a total of $1,350 in commissions for the sale of Microsoft and Apple shares. He regretted the sale of Teck shares and purchased the same number of shares back on August 29 of the same year.

In 2017, Mr. Arnold acquired 12,500 at a rate of 1 = $1.80. The funds were immediately used to acquire 500 shares of a British company, Zone Ltd., at a price of 25 per share. In January 2020, he sold all of the shares for 32 per share, leaving all of the British pounds in his trading account. At this time, 1 = $1.60. In December 2022, he converted the British pounds to Canadian dollars at a rate of 1 = $1.70.

During the year, Mr. Arnold also sold a collectible figurine that was given to him when he was a child. While it had only cost his parents $500, it had increased significantly in value. It was sold through a local antique store for $3,500.

Mr. Arnold supports the church that he attends with monthly donations of $200 throughout 2022.

Previous year information:

Mr. Arnolds prior year net income was $98,040.

This was composed of employment income of $93,040 (after the deduction of $4,000 for RPP contributions), interest income of $3,000, a rental loss of $7,000, and business income of $9,000.

Mr. Arnold paid child support of $ 5,000 to his ex-wife from the previous marriage. Tax-free savings account (TFSA) contributions of $ 3,000 and registered savings plan (RESP) contributions of $ 3,000 were also made in the previous year.

At the end of the previous year, Mr. Arnolds unused RRSP deduction room was $6,200 and he had no undeducted contributions. His employer reported a PA of $8,000.

Required:

Ignore GST considerations in making your calculations.

Calculate Mr. Arnold's maximum deductible RRSP contribution for 20XX. (15 marks)

Assume that Mr. Arnold contributes the amount calculated in Part A to his RRSP. Calculate Mr. Arnold's 20XX net employment income. (30 marks)

Calculate Mr. Arnold's Net Income for Tax Purposes and Taxable Income. (30 marks)

Calculate Mr. Arnold's Federal Tax Payable before consideration of any income tax that would have been withheld or paid in instalments. (25 marks)