Doug and Tammy have not filed their income tax returns for 2020. They have asked you to prepare both of their 2020 income tax returns and provide you with the following information.

Doug is 50 years old and has been married to Tammy for 20 years. Tammy is 48 years old. They have two healthy children, 11-year-old Ryan, and 9-year-old Zoe. During 2020 Ryan earned $800 in part-time jobs and Doug volunteered 300 hours in search and rescue and was not paid for this volunteer work.

Doug is the sole proprietor of a financial consulting business with a December 31 year end. In 2010, when he opened his business, he purchased a new Class 1 office building for $750,000, that included $180,000 worth of land value. Doug uses all of the building for his business. On January 1, 2020, the building had a UCC of $431,676.

In March 2020 Doug purchased $204,000 of office furniture. He sells the old furniture for $31,000. The old furniture had an ACB of $93,000 and a UCC of $34,284. Doug also purchased a computer for $1,200, applications software for $2,044, and a client list from another consulting firm for $41,000.

Doug uses a car for business. On January 1, 2020, he purchased a new car for $65,000. During 2020 he drove it a total of 32,000 kilometers, with 29,000 kilometers of those kilometers related to business. The car's operating costs for the year were $4,800.

Other costs Doug incurred in 2020 were building operating costs $24,300, staff wages $42,000, miscellaneous office costs $17,500, and meals with clients $15,300. During 2020 Doug provided and billed his clients for services worth $354,800.

Tammy works for a large Canadian public company. Her 2020 salary was $62,000. Tammy's employer matches her Registered Pension Plan (RPP) Contribution. Her employer withheld the following amounts from her pay:

Registered Pension Plan Contributions $2,500

EI Premiums 856

CPP Contributions 2,732

Tammy is required to travel for employment. She uses her own car for employment. She purchased a car on January 1, 2020, for $42,000. During 2020, she drove a total of 36,000 kilometers of those 31,500 kilometers were for employment. The car's total operating costs were $3,465. In addition, Tammy's out of town travel costs were $3,200 for hotels and $1,300 for food. Tammy's employer paid her a $4,400 allowance for hotels and food, and $5,200 allowance to compensate her for having to use her own car for employment.

Doug's Mutual Fund investments in 2020 distributed:

Capital Gains $22,960

Eligible Dividends 8,500

Interest Income 5,500

Total $36,960

Both Doug and Tammy have Registered Retirement Savings Plans (RRSP). At the beginning of 2020, Doug's RRSP had $11,000 in unused deduction room and $13,000 in undeducted contributions. During 2020, he contributed $22,000 to his RRSP. Doug's earned income for 2019 was $123,000. He plans to take the maximum deduction available.

However, in December 2017, Doug withdrew $25,000 from his RRSP under the Home Buyers' Plan. In January 2018, he used this $25,000 to purchase a new home. Also, in 2018 he repaid $10,000 of the Home Buyers' Plan balance. He has not made any repayment to the Home Buyers' Plan during either 2019 or 2020.

At the beginning of 2020, Tammy had $7,000 of unused deduction room in her RRSP. She has been able to deduct all the contributions she had made in previous years. In February 2017, Doug contributed $5,000 into Tammy's RRSP and deducted it on his 2017 return. He has not made any additional contributions to Tammy's plan. In December 2020, Tammy withdrew $7,000 from her RRSP to loan to her brother. In February 2021, her brother pays her back the $7,000, along with a gift of $15,000 for being such a great sister. Tammy immediately puts the $7,000 back into her RRSP. Tammy's earned income for 2019 was $51,000. Her employer reported a pension adjustment for that year of $4,800. She plans to take the maximum deduction available.

At the beginning of 2020, Tammy's employer increased the defined benefit formula of the company's RPP in accordance with a new collective agreement. Previously, the benefit was based on 1.5% of pensionable earnings for each year of service. The new agreement calls for a benefit based on 1.75% of pensionable earnings for each year of service. This change is applied retroactively. Tammy has been a member of the plan since 2017. Her pensionable earnings during those years are as follows:

Year Pensionable Earnings

2016 $40,000

2017 45,000

2018 48,000

1. Doug paid the following medical bills for 2020:

Doug's Hair Replacement $7,500

Tammy's Prescription Glasses 850

Tammy's Teeth Whitening 1,025

Ryan's Prescription Glasses 350

Ryan's Psychologist 1,500

Zoe's Physiotherapy 725

Total $11,950

Doug and Tammy will allocate tax credits between them to minimize the family's income tax bill. Where either spouse can claim the credit and it makes no difference in the combined tax payable, Doug will claim the credit.

Required:

A. Determine Tammy's Net Income, Taxable Income, and Taxes Payable/Refund for 2020.

B. Determine Doug's Net Income, Taxable Income, and Taxes Payable/Refund for 2020.