Case A: You, CPA, are the tax partner in your own small accounting firm, You CPA LLP. You have just finished meeting with a new client, Ronald Wong , who is a commission salesperson working for Golden Arches Food ("GAF"), a Canadian controlled private corporation (CCPC). Ronald was unhappy with his previous accountant, who never explained anything and was always filing his tax returns late. During the meeting, Ronald provided you with a copy of his previous year's income tax return as well as an overview of his earnings and deductions for the current year. He would like you to prepare a preliminary calculation of net income for tax purposes for him for the 2020 taxation year. Applicable information from the previous year's tax return, as summarized by your assistant, is included in Exhibit II. Your assistant's notes from meeting with Ronald regarding his 2020 earnings are included in Exhibit I. Exhibit I 2020 Tax Information for Ronald During 2020 Ronald's gross salary from his sales job at GAF, not including commissions or allowances, was $137,335 . His commissions for the totalled $ 2,694 . All of this information has been taken from Ronald's year end paystub as he has not received a T4 slip for the year yet. The following amounts were withheld by GAF from Ronald's gross salary according to the paystub: Federal income tax deducted 43,947 Canada Pension Plan (CPP) 2,898 Employment Insurance (EI) 856 Registered pension plan contributions (Note 1) 6,867 Pension adjustment 13,734 Payments for personal use of company car (Note 2) 739 Union dues (Note 3) 549 Interest paid on employer provided loan (Note 4) 721 Life insurance premiums (Note 5) 1,587 Note 1: GAF made a matching contribution to Ronald's pension plan. Note 2: GAF provides Ronald with a vehicle that was purchased several years ago. The current fair market value of the vehicle is $ 25,654 . The vehicle was originally purchased for $ 30,785 , including GST. The vehicle is available for personal and employment use for Ronald .During the current year, the vehicle was driven a total of 24,847 km's of which 11,926 are personal in nature. GAF paid all of the operating costs of the car, a total of $ 7,696 for the current year. While Ron was on vacation for one month, he returned the company car to GAF, even though the employer did not require him to return the car during his absence. Note 3: GAF is a unionized company and therefore Ronald must pay union dues each year. Note 4: On January 1, of the current year, GAF provided Ronald with a low interest loan with a principal amount of 76,963 . The loan requires principal repayments of 7,696 on the first day of each calendar quarter, starting on April 1, 2020 . The loan does not qualify as a home purchase or home relocation loan. Note 5: GAF made a matching premium payments towards Ronald's life insurance. Other Information: (a) On March 1, of the current year, Ronald received stock options from GAF to acquire 102.6179 shares for $ 46.18 per share. At the time the options are issued the shares are trading at $ 46.18 per share. In June of the current year, the shares have increased in value to $ 48.49 per share when Mr. Wong exercises his options to acquire 103 shares. On December 31, he sells all of the shares for $ 55.41 per share. (b) Mr. Wong incurred the following sales expenses related to his commission income: Meals (while out of town) $ 3,079 Lodging $ 3,848 Entertainment $ 1,385 Total Expenses $ 8,312 (c) Ronald's employer sent him to a safety in the workplace course. The cost of tuition for this course was $ 280 . (d) Ronald's employer provided him with a gift certificate for his birthday with a value of $ 420 . (e) GAF provides Mr. Wong with a membership at the local golf and country club, Seven Oaks. The annual membership costs $ 8,081 and Mr. Wong uses the membership primarily (more than 50% of the time) for golfing with friends. (f) GAF declared bonuses to all of its employees on December 15, of the current year. Ronald's bonus of $10,987 was included with his regular payroll electronic transfer on Jan.3, 2021 . (g) Mr. Wong purchased a residential property in Edmonton in the prior year. For the current year, the income and expenses related to the rental property are as follows: Rental income per month $ 3,086 Property tax per month $ 132 Insurance per month $ 88 Mortgage payments per month $ 3,384 Principal portion of payments $ 1,015 Repair to floor damaged by bathroom flood $ 6,984 Closing UCC balance from prior year for Class 1 $ 246,283 (h) Mr. Wong received the following amounts from his investment account with TD Waterhouse: (all amounts in Canadian dollars) Dividends received from CCPC subject to low rates of tax $ 4,843 Dividends received from foreign corporations $ 2,421 Interest payment received on December 31, 2020 (Note i) $ 11,847 Note (i): The corporate bond has a maturity value of $ 153,927 and an annual interest rate of 3.08% . This bond was issued on July 1, 2018 and will mature ten years later on June 30 2028 . The above mentioned payment is the interest payment for the first 2.5 years of the bond, the remaining interest will be paid with the principal on the maturity date. (i) Ronald incurred the following interest expense amounts during the current year: Interest on the mortgage for Ronald's personal home $ 4,738 Interest paid on Ronald's credit card balance $ 431 Interest on a loan used to purchase investments with TD Waterhouse $ 5,817 (j) In addition to investing using traditional methods, such as purchasing stocks and bonds, Ronald also liked to invest some of his savings into local businesses. In the previous year, he invested funds into a local food truck business. In the current year, the food truck had a net business loss (for tax purposes) of $ 5,327 . As one of two partners in the business, Ronald's share of the business loss is $ 2,663 Exhibit II Prior Year Tax Information for Ronald Wong Ronald is 47 years old in the current year. Ronald was previously married. The divorce agreement, which was issued in 2017 requires Ronald to make monthly spousal support payments to the former spouse in the amount of $ 823 . He made all of the required support payments during the current year.