Dr. Jordan Davis has hired your professional services to file her income tax return. Dr. Davis is a retired surgeon. Due to her failing eyesight, Jordan was required to retire from her occupation at a younger age than normal. Fortunately, Jordan has more than enough income to support herself as a result of years of receiving a very large salary as a surgeon and a family inheritance. Jordan has invested most of her past employment earnings into a large portfolio which paid the following amounts during 2020 , the current year. Additional info (part 1) \begin{tabular}{ll} \hline Item & Amount \\ Dividends from public Canadian corporations (subject to high corporate tax & $24,500 \\ rates): & \\ Dividends from private Canadian corporations (subject to low corporate tax & 32,000 \\ rates): & 19,000 \\ Interest income received from \\ Dividends from foreign corporations (translated into Canadian dollars): & 12,400 \end{tabular} Note: Total foreign dividends earned was $13,850 less foreign tax withheld of $1,450. Jordan's portfolio of investments includes a five-year investment contract purchased three years ago on September 1. The investment contract has a maturity value of $165,000 and an annual interest rate of 3%. The total interest earned on the investment contract will be paid on maturity on September 1, 2022, two years from now. Jordan did not receive any interest (cash) from this investment contract in 2020. Jordan's portfolio of investments is managed by a large Canadian brokerage firm called Appleton Investments Inc. ("Appleton") Appleton charges Jordan investment counsel fees of $5,350 during 2020. Additional info (part 2) In 2019 , the previous year, Jordan received a large family inheritance, which she invested into a rental property. The property was purchased in 2019 , and Jordan has claimed the maximum amount of capital cost allowance (CCA) on the property in 2019. In 2020, the opening UCC balance in CCA Class 1 for the rental building is $360,000 and Jordan would like to claim the maximum CCA deduction on the rental income in 2020. The rental income and expense information for 2020 is as follows. To assist with filing her tax return, Jordan provides you with detailed records from her bank. The documents indicate that Jordan has borrowed the following amounts from her bank. - $210,000 mortgage on the rental property with principal repayments totalling $14,000 and interest payments of $7,200 for 2020 - $405,000 mortgage on Dr. Davis's personal home with principal repayments 1. Compute Dr. Davis's net property income for 2020 . 2. Jordan has reviewed your calculation of net property income and she is confused. Jordan does not understand why the dividend income included in your calculation is different than the amounts she received in the year. Describe for Jordan the concept of integration and how this impacts the taxation of Canadian source dividends as well as the tax consequences of foreign source dividends received by an individual in Canada. 3. Jordan informs you that she plans on selling her rental property in the near future and using a portion of the proceeds from the sale to pay off some of her debt with the bank. Jordan would like your advice on which loans she should pay back first in order to achieve the most favourable tax consequences. 4. Prior to selling the rental property, Jordan plans on upgrading the wood siding on the house to vinyl siding. Explain to Jordan the difference between capitalizing and expensing costs, and indicate which treatment the siding cost should receive. 5. Explain to Jordan the tax consequences that could occur if she sells the rental property due to the fact that she has claimed the maximum CCA on the rental property since acquisition. Requirement 1. Compute Dr. Davis's net property income for 2020. Fill in the table below to compute the net property income. (Round amounts to the nearest cent. Enter deductions with parentheses or a minus sign.) Dr. Jordan Davis has hired your professional services to file her income tax return. Dr. Davis is a retired surgeon. Due to her failing eyesight, Jordan was required to retire from her occupation at a younger age than normal. Fortunately, Jordan has more than enough income to support herself as a result of years of receiving a very large salary as a surgeon and a family inheritance. Jordan has invested most of her past employment earnings into a large portfolio which paid the following amounts during 2020 , the current year. Additional info (part 1) \begin{tabular}{ll} \hline Item & Amount \\ Dividends from public Canadian corporations (subject to high corporate tax & $24,500 \\ rates): & \\ Dividends from private Canadian corporations (subject to low corporate tax & 32,000 \\ rates): & 19,000 \\ Interest income received from \\ Dividends from foreign corporations (translated into Canadian dollars): & 12,400 \end{tabular} Note: Total foreign dividends earned was $13,850 less foreign tax withheld of $1,450. Jordan's portfolio of investments includes a five-year investment contract purchased three years ago on September 1. The investment contract has a maturity value of $165,000 and an annual interest rate of 3%. The total interest earned on the investment contract will be paid on maturity on September 1, 2022, two years from now. Jordan did not receive any interest (cash) from this investment contract in 2020. Jordan's portfolio of investments is managed by a large Canadian brokerage firm called Appleton Investments Inc. ("Appleton") Appleton charges Jordan investment counsel fees of $5,350 during 2020. Additional info (part 2) In 2019 , the previous year, Jordan received a large family inheritance, which she invested into a rental property. The property was purchased in 2019 , and Jordan has claimed the maximum amount of capital cost allowance (CCA) on the property in 2019. In 2020, the opening UCC balance in CCA Class 1 for the rental building is $360,000 and Jordan would like to claim the maximum CCA deduction on the rental income in 2020. The rental income and expense information for 2020 is as follows. To assist with filing her tax return, Jordan provides you with detailed records from her bank. The documents indicate that Jordan has borrowed the following amounts from her bank. - $210,000 mortgage on the rental property with principal repayments totalling $14,000 and interest payments of $7,200 for 2020 - $405,000 mortgage on Dr. Davis's personal home with principal repayments 1. Compute Dr. Davis's net property income for 2020 . 2. Jordan has reviewed your calculation of net property income and she is confused. Jordan does not understand why the dividend income included in your calculation is different than the amounts she received in the year. Describe for Jordan the concept of integration and how this impacts the taxation of Canadian source dividends as well as the tax consequences of foreign source dividends received by an individual in Canada. 3. Jordan informs you that she plans on selling her rental property in the near future and using a portion of the proceeds from the sale to pay off some of her debt with the bank. Jordan would like your advice on which loans she should pay back first in order to achieve the most favourable tax consequences. 4. Prior to selling the rental property, Jordan plans on upgrading the wood siding on the house to vinyl siding. Explain to Jordan the difference between capitalizing and expensing costs, and indicate which treatment the siding cost should receive. 5. Explain to Jordan the tax consequences that could occur if she sells the rental property due to the fact that she has claimed the maximum CCA on the rental property since acquisition. Requirement 1. Compute Dr. Davis's net property income for 2020. Fill in the table below to compute the net property income. (Round amounts to the nearest cent. Enter deductions with parentheses or a minus sign.)