CASE STUDY ASSIGNMENT It is February 25 th of 2022, Isabelle and Jaxon have come to you asking for tax consultation. They were married from 1997 till 2012 with two children Elie and Antoine. In 2012, they got divorced. Isabelle is now 46 years old and lives with her two children, Elie (19 years old), and Antoine (12 years old), in her new house located in Oakville, ON, which she has purchased on January 30, 2021. Before that, the family lived in a rented apartment in Mississauga, ON. Her ex-husband, Jaxon is now 49 years old. He moved to Toronto, Ontario on May 31, 2021. Jaxon spent ten years in France after their divorce and moved back to Canada to start his career in information technology field. Here is the information you have gathered in Exhibits I and I l below.

EXHIBIT ISABELLE FINANCIAL AND TAX INFORMATION

1. Isabelle is a media consultant. She had been employed for many years by a Canadian Controlled Private Corporation (CCPC), Golden Inc., located in Ontario. Her salary and benefits for 2021 were $104,800. From this, Golden Inc. deducted CPP and Elof $4,056, income tax of $27,248. On top of that, Golden Inc. paid the $100 premium for Isabelle's group term life insurance coverage of $60,000.

2. Isabelle also has the following income (losses) for 2021: business loss of $5,000, eligible dividends of $25,000, non-eligible dividends of $20,500, and spousal support of $32,000.

3. Isabelle's employment income includes a stock option benefit of $20,000. The exercise price was higher than the share value at the date that the option was granted. In 2021, she sold the shares and realized a taxable capital gain of $10,400.

4. During 2021, Isabelle contributed $19,900, which is within her deduction limit for 2021, to her RRSP.

5. Isabelle paid an amount of $8,400 in tuition fees for her son Elie to attend a college degree program on a full-time basis for 8 months during 2021 $2,800 was paid in November 2020 for the Winter 2021 term and $5,600 was paid in July, 2021 for the Fall 2021 term. Elie's income for 2021 was $7,000.

6. During 2021, Elie paid $4,100 medical expenses for dental services provided in a dentist's office. These expenses were not covered by Isabelle's health insurance plan.

7. Isabelle made charitable donations of $22,000 during 2021.

8. At the end of 2020 (previous year), Isabelle had unused non-capital losses of $2,100.

9. The following other payments occurred during 2021: (a) paid contributions to a registered federal political party of $1,700, and (b) paid interest on late payment of 2020 income tax of $700. BMT644NGG Case study Assignment - Winter 2022 Page 2 of 3

EXHIBIT (I l ): JAXON FINANCIAL AND TAX INFORMATION

1. Jaxon is a professional information technology trainer. In June of 2021, Jaxon was hired by a Canadian industrial corporation, Longueuil Inc., to run training IT courses for their employees. Jaxon then visited USA to provide consulting services to Longueuil Inc. associated corporation from August 1 st to August 12th, 2021. Jaxon recruited IT expert to assist him and complete the training courses he started before his trip to USA.

2. Jaxon earned $66,400 from June to December 2021 from the training courses delivered to Longueuil Inc., and $33,200 from the IT consultation provided to Longueuil Inc. and its associated corporation in Canada and USA.

3. Longueuil Inc. provided Jaxon with office space, internet and intranet access, vehicle with driver during the training courses delivered in Canada. Jaxon's personal laptop, website, training materials and collection of equipment's were used to prepare the training courses and consulting jobs. Jaxon was paid from June to December 2021 and was not provided any additional benefits or insurance by Longueuil Inc.

4. Jaxon also earned $11,200 from January to April 2021 while still living in France.

5. Jaxon received $1,900 in foreign dividends in March 2021 and $2,700 in eligible dividends in October 2021 from Canadian corporation listed in Toronto Stock Exchange market (TSX). Jaxon's sister e-transferred $2,300 as a gift for Jaxon' 49th birthday in August 2021.

6, During 2021, Jaxon paid spousal support payments of $32,000 to his ex-wife (Isabelle). INSTRUCTIONS

A. Determine Isabelle's minimum net income for tax purposes in accordance with the aggregating formula of section 3 of the Income Tax Act for 2021 taxation year? (Ignore CPP enhanced contributions) (8 marks)

B. Determine Isabelle's minimum taxable income for 2021 taxation year? (2 marks)

C. Determine Isabelle's federal income tax payable for 2021 taxation year (34 marks)

D. Analyze the facts and come to a supported conclusion on whether Jaxon is an independent contractor or an employee of Longueuil Inc. for 2021? (5 marks)

E. Explain Jaxon' residency status for Canadian tax purposes for 2021? (3 marks)

F. Do you think Isabelle and Jaxson current marital status would affect their income tax returns for 2021? Explain (3 marks)

G. How much net income for tax purpose is Jaxon required to report for 2021 taxation year? Explain why any items have been excluded from your calculations. (5 marks)