Family Information

Roland Sorter has been married to Rachel since their graduation from university. They have two healthy children:

Richard Their son, Richard, is 14 years old. He has 2022 net income from part-time jobs of $2,300.

Roxanne Their daughter, Roxanne, is 11 years old. Her 2022 net income, also from part-time jobs, is $3,600.

The familys medical expenses, all paid for by Rachel, are as follows:

Prescription glasses for Roland

Rhinoplasty for Rachel (see Rachels business income) Physiotherapy fees for Richard and Roxanne

Dental braces for Richard

Psychologist counselling fees for Roxanne

Total

$ 625 9,350 1,475 8,560 2,450 $22,460

In 2022, Roland worked 225 hours as a voluntary firefighter. He did not receive any compensation for his work.

Rachels Business Income

Rachel is a lawyer who carries on a professional practice as a sole proprietor. The business has a December 31 fiscal period. In 2022, Rachels revenues totalled $411,000.

The business operates out of a building that Rachel purchased for this purpose in 2018. The building was purchased for $675,000, of which $175,000 reflected the estimated FMV of the land. When purchased, the building was new, and an election was fled to include it in a separate class 1, CCA rate 6%. Rachels practice uses all of the building. On January 1, 2022, the UCC of the building was $433,521.

In 2022, Rachel renovated her offices, replacing the old furniture and fixtures with new furniture and fixtures at a cost of $67,000. The furniture and fixtures that were sold had a capital cost of $29,500 and an accounting carrying value of $13,000. They were sold for $13,000. The UCC at January 1, 2022, was $13,594. Class 8, CCA rate 20%.

In 2022, Rachel purchased other depreciable property as follows:

A client list from a retiring lawyer for $23,000, Class 14.1, CCA rate 5%. A new laptop computer for $1,400, Class 50, CCA rate 55%.

Applications software for $3,600, Class 12, CCA rate 100%.

As she offers mobile legal services as part of her practice, Rachel uses an automobile in her business. She retired her previous automobile at the end of 2021, and on January 1, 2022, she purchased a new BMW for $53,000, Class 10.1, CCA rate 30%. In 2022, it was driven 21,000 kilometres, 3,000 of which were for personal use and 18,000 for business use. Operating expenses for the automobile in 2022 were $4,200.

Other 2022 operating expenses of her business, determined on an accrual basis, are as follows:

Building operating expenses Salaries and wages

Office expenses

Meals with clients

Rolands Employment Income

$29,400 53,200 21,800

8,600

Roland works for a large Canadian public company. His 2022 salary is $66,500, none of which involves commissions. His employer withholds the following amounts during the year:

RPP contributions* $2,300 EI premiums 953 CPP contributions 3,500 Union dues 460 *Rolands employer makes a matching contribution of $2,300.

Rolands work requires some amount of travel. He uses his own automobile for this travel. The automobile was purchased on January 1, 2022, at a cost of $29,500, Class 10, CCA rate 30%. In 2022, he drove the vehicle 28,000 kilometres, of which 22,600 were employment related and 5,400 for personal purposes. Operating expenses for the year were $5,600.

In addition to automobile expenses, Roland has other travel related expenses as follows:

Hotels $2,800 Food on overnight out of town trips 930

In addition to his salary, Rolands employer provides him with two separate allowances. The allowance for out of town travel is based on industry standards. The two allowances provided are as follows:

Hotels and out of town meals $3,800 Use of personal automobile ($700 monthly) 8,400

Investment Information

All of the investments are owned by Rachel as they were purchased with her own funds. In 2022, these investments produced the following amounts of income:

Capital gains on the sale of public company shares Eligible dividends

Interest income

Total

Roland has no investment income in 2022.

$12,750 11,500 6,300 $30,550

Roland and Rachel will allocate personal tax credits between them to minimize the familys federal income tax liability where possible. Where either spouse can claim the credit and it makes no difference in the federal income tax payable, Rachel will claim the tax credit.

Required: Ignore GST/HST & PST considerations in your solution.

A. Determine Rachels 2022 net income and taxable Income. B. Determine Rachels 2022 federal income tax payable.

C. Determine Rolands 2022 net income and taxable income. D. Determine Rolands 2022 federal income tax payable.