Earl Grey has come to you for some help in computing his income from his investments. He is trying to plan for the payment of his 2020 taxes and wants an idea as to how much that tax bill will be. Earl is married to Flo and they have two daughters, Mint-Green, who is 22 and attends university and Thea Lemon, who is 5. Earl has provided you with the following details regarding his activities for 2020.

Earls income for the year is as follows:

Salary gross $42,000

Bonus (based on company profits for the year) 3,000

Less:

CPP contributions (2,021)

EI contributions (711)

United Way charitable contributions (500)

Taxes withheld (5,000)

$36,768

Earl has owned Chamomile Co. shares for a number of years. Chamomile is a public Canadian company. The shares paid total dividends of $165 in 2020.

On October 1, 2020, after the dividend payments for the year, Earl sold 800 shares for $28.125 per share for total proceeds of $22,500. Brokerage fees are $200. Based on his history of transactions, at the time of the sale, shares had an adjusted cost base of $6.50 per share.

At the beginning of 2020, Earl had two rental properties. These properties have the following operating cash flows associated with them:

#1 #2

Gross rents received................................................. $ 68,000 $ 16,000

Rental operating expenses............................................ 31,500 5,800

The UCC balance in Class 1 for property #1 was $26,975 and for property #2 was $33,139 at January 1, 2020. During 2020, Earl made improvements to property #1 and paid $980,000 for major improvements during July 2020.

He decided to sell property #2 and did so on May 5, 2020. Sale price of the building was $128,000 and $140,000 of the land. Property #2 was purchased in 2012 and at that time the cost of the building was $45,000 and the cost of the land was $60,000.

Mint-Greens income from part-time jobs was $4,200 for the year. Mint-Greens tuition for the eight months that she was in full-time attendance is $4,000. She would like to transfer maximum tuition to her father.

Upon further questioning, Earl revealed that his daughter, Mint-Green, has very poor vision. It costs $800 to buy her contact lenses that last about three years. The last pair was purchased in November 2020. Other medical receipts total about $10,200 this year and were all related to medically necessary dental work that Mint-Green had.

Earls wife Flo earned $3,000 by the end of the year. Flo is an economist who occasionally finds contract work preparing economic forecasts at the minimum wage. Flo is certified as having a mental impairment.

As Flow is incapable of caring for the children as a result of her mental impairment, Earl will be claiming child care expenses for Thea Lemon. These expenses amounted to $5,500 this year.

Earl has a net capital loss balance of $10,000 arising from a disposition in 2015. He did not realize any capital gains, other than as noted above, during the period from 2015 to the present.

REQUIRED: Show all calculations for full marks.

In Excel template provided:

1. Calculate clients 2020 Division B net income for tax purposes using the format in ITA 3.

2. Calculate clients 2020 taxable income.

3. Calculate clients federal taxes owing or refundable for 2020.