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 2017 taxes and wants an idea as to how much that tax bill will be. He has provided you with the following details regarding his investments for 2017.

Banking

He has a chequing and savings account that are both joint with his wife, Rose (funds contributed and used by both). Total service charges are $240; total interest earned is $100.

GIC

He has a 5% three-year semi-annual compound-interest GIC purchased April 1, 2016 for $10,000. Interest accruing on the GIC has been as follows:

April 1, 2016 to September 30, 2016.........................

$250

October 1, 2016 to December 31, 2016.....................

126

January 1, 2017 to March 31, 2017............................

123

April 1, 2017 to September 30, 2017.........................

250

October 1, 2017 to December 31, 2017.....................

125

Shares

He has owned Chamomile Co. shares for a number of years. Chamomile is a public Canadian company and his employer. The shares paid total dividends of $0.06 per share in 2017. On October 1, 2017, 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. The history of transactions in Chamomile is as follows:

February 2004

He purchased 1000 shares for $8 per share under his employer's stock option plan. At the time of the exercise, the shares were valued at $10.50 per share.

June 2008

These shares were split 2 for 1.

July 2008

He purchased an additional 600 shares for $12.50 per share.

Apri1 2009

He received a 5% stock dividend on these shares. The company increased paid-up capital by $1 per share as a result of this stock dividend.

Earl also owns shares of Tetley, a British corporation. During the year he received dividends of $1,700 (translated into Canadian dollars, net of $300 taxes withheld).

Rental Properties

At the beginning of 2017, Earl had two rental properties. These properties are expected to have the following operating cash flows associated with them:

#1

#2

Gross rents received

$20,000

$12,000

Expenses related to earning rental income:

Advertising (for tenants)

200

Nil

Property taxes

2,400

2,000

Utilities (landlord provided)

4,200

2,800

Property #1 was purchased in 2003 at a cost of $500,000 for both the land and building. The cost of the land was $90,000 of the total purchase price. Property #2 was purchased in 2006 at a total cost of $305,000; the fair market value of the land at the time was $105,000. The UCC balance in Class 1 for property 1 was $236,339 and property 2 was $130,307 at January 1, 2017.

During 2017, the local community enacted strict new bylaws on the safety requirements of rental properties. To upgrade the two properties to the new code would require $40,000 for property #1 and $60,000 for property #2. As a result, Earl decided to improve #1 and paid $40,000 during July 2017. However, he decided to sell property #2 and did so for $448,000, effective May 5, 2017. The fair market value of the land was appraised to be $120,000 and the building $328,000. The purchaser of the property paid $100,000 on May 5, 2017, plus a mortgage that repays $10,000 monthly plus interest at 10% computed semi-annually. Thus, combined payments on June 5, 2017 through November 5, 2017, inclusive, were for $11,233 each, and from December5, 2017 through May 5, 2017, inclusive, will be $10,733 each.

Earl used the proceeds, net of the $40,000 needed for property #1, to purchase a new sixplex on Orange Pekoe Lane. The cost of the new property was $900,000, of which $150,000 related to the cost of the land. This property closed on August 1, 2017. Interest on the $700,000 mortgage is $21,800 for the last five months of the year. He was able to rent the building's units to students beginning in September with cash flows as follows:

Gross rents received.................................................................

$18,000

Expenses related to earning rental income:

Advertising (for tenants)..........................................................

500

Property taxes.............................................................................

3,400

Utilities (paid by tenants).......................................................

Nil

Other Transactions

Sale of personal boat (cost $4,500 in 2012)..........................

$1,500

Sale of jewellery inherited from a great aunt (fair market value at time of inheritance was $800)............................

2,000

Sale of antiques also inherited from this same great aunt (fair market value at time of inheritance was $300)........................................................................................

900

Sale of old coin collection (cost $1,500)................................

850

Required:

Calculate the effect on income for tax purposes for 2017 of the above investments. Mr. Grey always likes to report the minimum possible income each year. Support your treatment of each item listed above with a reason or a complete calculation.