Ch. 7/Study Guide - Assignment Problems 181 Problem 13 ITA: Division B, Subdivisions a, b, c Mr. Richmond, a new client, has invested in rental properties, principal residences and other capital property with inheritance monies and other liquid cash. He provides you with the following information with respect to his 2021 taxation year. Mr. Richmond is employed by Wealth Inc., a Canadian-controlled private corporation, and received the following income and benefits: $ 49,820 (1) Salary (net) Payroll deduction: Income taxes CPP Registered pension plan (defined benefit: current service) $17,424 3,166 8901 3,700 25,180 $ 75,000 ha (2) Mr. Richmond paid professional fees of $500 to the Professional Engineers of Ontario. (3) Mr. Richmond sold two lots of his Wealth Inc. employee stock option shares. He provides you with the following: 1st lot - 450 shares sold on March 15, 2021, for $26.50 per share. These shares were exercised on February 2014 for $8. The fair market value of each share on the date exercised was $10.50. The fair market value at the date of grant was $8. 2nd lot - 600 shares sold on December 5, 2021, for $25 per share. These shares were exercised on April 12, 2021, for $15. The fair market value of each share on the date exercised was $21. The fair market value at the date of grant was $17. (4) Mr. Richmond received an interest-free loan of $9,000 on March 12, 2021, to enable him to purchase the 2nd lot of shares of Wealth Inc. The loan was outstanding until the shares were sold only December 5, at which time the loan was repaid. Assume that the prescribed rate throughout the year was 3%. In addition, during 2021, Mr. Richmond received the following income from various sources including certain capital dispositions. (A) Mr. Richmond sold the following assets: CHAPTER 7 Cost Proceeds Antique foot stool A Painting .. Stamp collection $1,100 950 250 $ 900 1,500 850 (B) During 2021, Mr. Richmond sold his two residences, in order to purchase a larger home in an expensive suburb. The following facts relate to these two residences: Date purchased Cost Commission Proceeds 2012 $95,000 City home. Cottage....... $21,000 12,000 15,500 $350,000 200,000 2007 (C) In addition to his residences, Mr. Richmond owns two rental properties. The following informa- tion pertains to these two properties: 17,850 aller med Cost of land Cost of building UCC January 1, 2021, Class 1 Rental revenue in 2021 Expenses: Taxes (property) Other expenses Mortgage interest Wealthier St. Richmount St. $70,000 $100,000 $55,000 $ 80,000 $39,000 $ 65,000 $18,000 $ 7,600 $ 2,100 4,300 3,600 $10,000 $ 1,800 6,100 Nil $ 7,900 The Richmount St. rental property was sold in November for proceeds of $250,000 less $9,000 of selling costs. Of the proceeds, $140,000 was for the land. Mr. Richmond purchased the Wealthier St. rental property by placing a mortgage on his home. His monthly payments are $450 per month, of which $300 per month represents interest. (D) Mr. Richmond received dividends from the following investment: Wealth Inc. - a Canadian-controlled private corporation (from income taxed at the low corporate rate). $800 SC (E) Mr. Richmond owns units in Dumark Mutual Fund. He received a 13 slip from Dumark Mutual Fund indicating the following income amounts allocated his account and reinvested in 2020: $1,200 Capital gains Actual amount of dividends .. Taxable amount of dividends 362 500 Mr. Richmond had invested $20,000 in the Dumark Fund in 2020. This resulted in the purchase of 1,640.824 units of the fund. In 2020, income of $46.31 was allocated to his account and reinvested. The reinvestment resulted in the purchase of 3.845 units at the market value of $12.044 per unit. The 2021 income allocation resulted, on reinvestment of the $1,544.97, in the purchase of 119.358 units at the market value of $12.944 per unit. Late in 2021, after the income allocation, Mr. Richmond sold 1,000 units for a total of $12,881. (F) Mr. Richmond sold a $100,000 Government of Canada bond for $115,327. This bond paid interest semi-annually at an interest rate which was much higher than current interest rates. The proceeds received of $115,327 included accrued interest of $5,327. Mr. Richmond had purchased the bonds on the open market for $98,000. (G) In 2018, Mr. Richmond loaned $120,000 to his brother-in-law's company which was a small business corporation. The loan paid interest at commercial rates, but no interest was received in 2021 because the company went into receivership. As an unsecured creditor, Mr. Richmond received 10 cents on the dollar ($12,000) in 2021 in full payment of this loan. (H) Mr. Richmond has a listed personal property loss, carried forward from 2015, of $ 700. Mr. Richmond has asked you to calculate his Division B income for 2021. Assume that he claimed $60,000 of his capital gains exemption in prior years. Ignore the effects of any leap year. Ch. 7/Study Guide - Assignment Problems 181 Problem 13 ITA: Division B, Subdivisions a, b, c Mr. Richmond, a new client, has invested in rental properties, principal residences and other capital property with inheritance monies and other liquid cash. He provides you with the following information with respect to his 2021 taxation year. Mr. Richmond is employed by Wealth Inc., a Canadian-controlled private corporation, and received the following income and benefits: $ 49,820 (1) Salary (net) Payroll deduction: Income taxes CPP Registered pension plan (defined benefit: current service) $17,424 3,166 8901 3,700 25,180 $ 75,000 ha (2) Mr. Richmond paid professional fees of $500 to the Professional Engineers of Ontario. (3) Mr. Richmond sold two lots of his Wealth Inc. employee stock option shares. He provides you with the following: 1st lot - 450 shares sold on March 15, 2021, for $26.50 per share. These shares were exercised on February 2014 for $8. The fair market value of each share on the date exercised was $10.50. The fair market value at the date of grant was $8. 2nd lot - 600 shares sold on December 5, 2021, for $25 per share. These shares were exercised on April 12, 2021, for $15. The fair market value of each share on the date exercised was $21. The fair market value at the date of grant was $17. (4) Mr. Richmond received an interest-free loan of $9,000 on March 12, 2021, to enable him to purchase the 2nd lot of shares of Wealth Inc. The loan was outstanding until the shares were sold only December 5, at which time the loan was repaid. Assume that the prescribed rate throughout the year was 3%. In addition, during 2021, Mr. Richmond received the following income from various sources including certain capital dispositions. (A) Mr. Richmond sold the following assets: CHAPTER 7 Cost Proceeds Antique foot stool A Painting .. Stamp collection $1,100 950 250 $ 900 1,500 850 (B) During 2021, Mr. Richmond sold his two residences, in order to purchase a larger home in an expensive suburb. The following facts relate to these two residences: Date purchased Cost Commission Proceeds 2012 $95,000 City home. Cottage....... $21,000 12,000 15,500 $350,000 200,000 2007 (C) In addition to his residences, Mr. Richmond owns two rental properties. The following informa- tion pertains to these two properties: 17,850 aller med Cost of land Cost of building UCC January 1, 2021, Class 1 Rental revenue in 2021 Expenses: Taxes (property) Other expenses Mortgage interest Wealthier St. Richmount St. $70,000 $100,000 $55,000 $ 80,000 $39,000 $ 65,000 $18,000 $ 7,600 $ 2,100 4,300 3,600 $10,000 $ 1,800 6,100 Nil $ 7,900 The Richmount St. rental property was sold in November for proceeds of $250,000 less $9,000 of selling costs. Of the proceeds, $140,000 was for the land. Mr. Richmond purchased the Wealthier St. rental property by placing a mortgage on his home. His monthly payments are $450 per month, of which $300 per month represents interest. (D) Mr. Richmond received dividends from the following investment: Wealth Inc. - a Canadian-controlled private corporation (from income taxed at the low corporate rate). $800 SC (E) Mr. Richmond owns units in Dumark Mutual Fund. He received a 13 slip from Dumark Mutual Fund indicating the following income amounts allocated his account and reinvested in 2020: $1,200 Capital gains Actual amount of dividends .. Taxable amount of dividends 362 500 Mr. Richmond had invested $20,000 in the Dumark Fund in 2020. This resulted in the purchase of 1,640.824 units of the fund. In 2020, income of $46.31 was allocated to his account and reinvested. The reinvestment resulted in the purchase of 3.845 units at the market value of $12.044 per unit. The 2021 income allocation resulted, on reinvestment of the $1,544.97, in the purchase of 119.358 units at the market value of $12.944 per unit. Late in 2021, after the income allocation, Mr. Richmond sold 1,000 units for a total of $12,881. (F) Mr. Richmond sold a $100,000 Government of Canada bond for $115,327. This bond paid interest semi-annually at an interest rate which was much higher than current interest rates. The proceeds received of $115,327 included accrued interest of $5,327. Mr. Richmond had purchased the bonds on the open market for $98,000. (G) In 2018, Mr. Richmond loaned $120,000 to his brother-in-law's company which was a small business corporation. The loan paid interest at commercial rates, but no interest was received in 2021 because the company went into receivership. As an unsecured creditor, Mr. Richmond received 10 cents on the dollar ($12,000) in 2021 in full payment of this loan. (H) Mr. Richmond has a listed personal property loss, carried forward from 2015, of $ 700. Mr. Richmond has asked you to calculate his Division B income for 2021. Assume that he claimed $60,000 of his capital gains exemption in prior years. Ignore the effects of any leap year