Course: introduction to taxation
Required:
Calculate, for the 2019 taxation year, your minimum Net Income for Tax Purposes as per the Section 3 ordering rules (48 Marks)
Case: Taxpayer Information You are 45 years-old and have a common-law spouse (Nat). Nat is 47 years old and is a school teacher employed by the Calgary Public School Board. Her net income in 2019 was $85,000. You have three children: Jane is 3 years old and attends a daycare program while you are both at work. Joan is 17 years old and has mental health problems. John is 21 years old and attends university on a full time basis for 10 months of the year. His tuition fees are $18,000. In 2019, Mark received a scholarship for $6,000 from your employer. For the past twenty years, you have been employed as a geologist by a large Canadian oil and gas company in Calgary, Alberta. During 2019, your basic gross salary amounts to $143,000. During 2019, your employer withheld the following amounts from your gross wages: Federal income tax $32,000 Employment Insurance premiums Max Canada Pension Plan contributions Max Registered pension plan contributions 5,400 Disability insurance premiums 700 Private health care premiums 1,200 Other Information: 1. In 2019, you also had the following shares transactions involving shares held in public corporations: Proceeds of Disposition Cost base and selling costs Capital Gain or (loss) Shares of Saturday Ltd. $20,000 $15,000 $5,000 Shares of Monday Ltd. $10,000 $22,000 (12,000) 2. In 2019, you received $800 of eligible dividends from Saturday Ltd. 3. In October 2019, you withdrew $6,500 from your Registered Retirement Savings Plan (RRSP). 4. On January 15, 2019, you received options to buy 1,500 shares of your employer's common stock at a price of $20 per share. At that time the shares were trading at $18 per share. You exercised these options on July 6, 2019, when the shares were trading at $25 per share. You did not sell any of the shares during the year. 5. Your employer offers employee loans at a low interest rate of 3%. On April 1, 2019, you borrowed $42,000 from the employer to buy a new vehicle that you will be using for employment duties. The prescribed rates for each quarter in 2019 were as follows: Quarter 1-4%, Quarter 2-5%, Quarter 3-6%, Quarter 4 -5%. 6. You are required to use your own vehicle for employment duties and have a signed form T2200 from your employer. The vehicle (class 10.1) was acquired on April 1, 2019 for $42,000 including GST. The company provided you with an allowance of 62 cents per kilometer driven for employment purposes. Your spent $5,600 for gas, oil and maintenance for your vehicle during 2019. The 2019 insurance and registration costs amounted to $2,200. In addition, in 2019, you drove the vehicle a total of 36,000 kilometers, of which 20,000 kilometers were carefully documented as employment-related travel. 7. During 2019, you received several gifts from your employer: As is the case for all employer's senior staff, you received a $400 Amazon gift certificate. In recognition of 20 years of continuous service, you received a painting that had a retail value of $1,600. At Christmas, all of the employees receive a gift certificate to buy a Christmas tree at a local tree farm. The estimated fair value of a Christmas tree is $100. 8. Your employer pays for family counselling services relating to mental health issues. The amount paid by the employer was $1,200. 9. Child care expenses for Jane amounted to $10,000 for 2019. 10. You made the following disbursements during the 2019: Fees paid to a financial planner $ 300 Payment of premiums for life insurance 1,200 Professional dues 1,350 Contributions to an RRSP 8,000 Tuition fee to attend a course needed for your employment** 800 **Your employer reimbursed you for the tuition fees for the course. 11. Your father, Robert, lives with you. He is 82 years old and his 2019 Net Income for Tax Purposes is $18,900. Robert has numerous health issues and is no longer able to live on his own. He uses a wheelchair which necessitated a home renovation in 2019. You had a wheelchair ramp installed outside the front entrance to your home and a new bathroom was added which can accommodate a wheelchair. The entire renovation cost $12,000. 12. The family's 2019 medical and dental expenses (excluding the private health care premiums), all of which were paid by you, were as follows: Yourself $ 900 Nat Jane 1,800 Joan 6,200 John 2,500 Robert 4,500 $27.400 3,200 Total Your private health care plan reimbursed fifty percent (50%) of the above medical and dental expenses for you, Nat, Jane and Joan. 13. In 2019, you contributed $5,200 to various registered charitable organizations in Canada. 14. In 2019, you bought a raffle ticket from the social club at your place of employment and won a travel trailer that has a retail value of $34,000. You were able to sell the travel trailer for $38,000 in 2019. 15. Individual Information Birthdate Sin You June 1, 1974 Student ID Nat April 1, 1972 527 000 345 Jane March 1, 2016 527 657 315 Joan May 5, 2000 527 657 319 John July 5, 1998 527 657 321 Robert February 28, 1937 527 000 079 Part A Calculate, for the 2019 taxation year, your minimum Net Income for Tax Purposes as per the Section 3 ordering rules. (Maximum marks - 48) Case: Taxpayer Information You are 45 years-old and have a common-law spouse (Nat). Nat is 47 years old and is a school teacher employed by the Calgary Public School Board. Her net income in 2019 was $85,000. You have three children: Jane is 3 years old and attends a daycare program while you are both at work. Joan is 17 years old and has mental health problems. John is 21 years old and attends university on a full time basis for 10 months of the year. His tuition fees are $18,000. In 2019, Mark received a scholarship for $6,000 from your employer. For the past twenty years, you have been employed as a geologist by a large Canadian oil and gas company in Calgary, Alberta. During 2019, your basic gross salary amounts to $143,000. During 2019, your employer withheld the following amounts from your gross wages: Federal income tax $32,000 Employment Insurance premiums Max Canada Pension Plan contributions Max Registered pension plan contributions 5,400 Disability insurance premiums 700 Private health care premiums 1,200 Other Information: 1. In 2019, you also had the following shares transactions involving shares held in public corporations: Proceeds of Disposition Cost base and selling costs Capital Gain or (loss) Shares of Saturday Ltd. $20,000 $15,000 $5,000 Shares of Monday Ltd. $10,000 $22,000 (12,000) 2. In 2019, you received $800 of eligible dividends from Saturday Ltd. 3. In October 2019, you withdrew $6,500 from your Registered Retirement Savings Plan (RRSP). 4. On January 15, 2019, you received options to buy 1,500 shares of your employer's common stock at a price of $20 per share. At that time the shares were trading at $18 per share. You exercised these options on July 6, 2019, when the shares were trading at $25 per share. You did not sell any of the shares during the year. 5. Your employer offers employee loans at a low interest rate of 3%. On April 1, 2019, you borrowed $42,000 from the employer to buy a new vehicle that you will be using for employment duties. The prescribed rates for each quarter in 2019 were as follows: Quarter 1-4%, Quarter 2-5%, Quarter 3-6%, Quarter 4 -5%. 6. You are required to use your own vehicle for employment duties and have a signed form T2200 from your employer. The vehicle (class 10.1) was acquired on April 1, 2019 for $42,000 including GST. The company provided you with an allowance of 62 cents per kilometer driven for employment purposes. Your spent $5,600 for gas, oil and maintenance for your vehicle during 2019. The 2019 insurance and registration costs amounted to $2,200. In addition, in 2019, you drove the vehicle a total of 36,000 kilometers, of which 20,000 kilometers were carefully documented as employment-related travel. 7. During 2019, you received several gifts from your employer: As is the case for all employer's senior staff, you received a $400 Amazon gift certificate. In recognition of 20 years of continuous service, you received a painting that had a retail value of $1,600. At Christmas, all of the employees receive a gift certificate to buy a Christmas tree at a local tree farm. The estimated fair value of a Christmas tree is $100. 8. Your employer pays for family counselling services relating to mental health issues. The amount paid by the employer was $1,200. 9. Child care expenses for Jane amounted to $10,000 for 2019. 10. You made the following disbursements during the 2019: Fees paid to a financial planner $ 300 Payment of premiums for life insurance 1,200 Professional dues 1,350 Contributions to an RRSP 8,000 Tuition fee to attend a course needed for your employment** 800 **Your employer reimbursed you for the tuition fees for the course. 11. Your father, Robert, lives with you. He is 82 years old and his 2019 Net Income for Tax Purposes is $18,900. Robert has numerous health issues and is no longer able to live on his own. He uses a wheelchair which necessitated a home renovation in 2019. You had a wheelchair ramp installed outside the front entrance to your home and a new bathroom was added which can accommodate a wheelchair. The entire renovation cost $12,000. 12. The family's 2019 medical and dental expenses (excluding the private health care premiums), all of which were paid by you, were as follows: Yourself $ 900 Nat Jane 1,800 Joan 6,200 John 2,500 Robert 4,500 $27.400 3,200 Total Your private health care plan reimbursed fifty percent (50%) of the above medical and dental expenses for you, Nat, Jane and Joan. 13. In 2019, you contributed $5,200 to various registered charitable organizations in Canada. 14. In 2019, you bought a raffle ticket from the social club at your place of employment and won a travel trailer that has a retail value of $34,000. You were able to sell the travel trailer for $38,000 in 2019. 15. Individual Information Birthdate Sin You June 1, 1974 Student ID Nat April 1, 1972 527 000 345 Jane March 1, 2016 527 657 315 Joan May 5, 2000 527 657 319 John July 5, 1998 527 657 321 Robert February 28, 1937 527 000 079 Part A Calculate, for the 2019 taxation year, your minimum Net Income for Tax Purposes as per the Section 3 ordering rules. (Maximum marks - 48)
