Fundamentals of Income Tax 2018 Case Study 3 2018 H&R Block Canada, Inc. Case Study Read the information below and then answer the questions which follow. Sonja (born on December 2, 1970) is married to Jeremy Anderson (born on April 5, 1965). They are the parents of three children: Derrick born on July 9, 1998; Wayne born on January 15, 2003; and Chelsea born on May 28, 2007. Chelsea is unable to walk and uses a wheelchair. She has Form T2201 on file with CRA and Jeremy has claimed the disability transfer for Chelsea in previous years. In 2012, Sonja had suffered an injury that caused her to go blind. She has Form T2201 on file with CRA. For the first part of 2017, she received $8,500 in income from a group sickness or accident insurance plan, which was an employee-pay-all plan that only she contributed to. She never received a slip for this benefit. She received Workers Compensation Benefits (WCB) of $7,800, reported on a T5007 slip. In April, Sonja inherited $23,000 from her late great-aunt. She set $15,000 aside with other savings to use as a down payment on a new home later in the year and put $1,000 each into savings accounts for her three children. Each of the children earned $25 of interest from these savings accounts. The bank did not issue information slips for the interest paid. Sonja contributed the remaining $5,000 of inheritance to a spouse or common-law partner RRSP. Sonjas RRSP limit is $4,000, and Jeremys is $23,000. Jeremy worked for Grant Manufacturing in Old City. In February, Jeremys union called a strike; during that time, he received $1,200 in strike pay. Jeremy has a receipt for $450 paid in union dues last year. May was Jeremys last month with Grant Manufacturing. He has a receipt for $9,000 from the portion of the retiring allowance that he contributed into his RRSP. In June, Jeremy took out $2,000 from the RRSP Sonja had contributed for him in April. In August, he started a new job at AA Consulting Inc in Your City. For the last 10 years, the family has resided in a house they owned at 789 King Street, Old City, YP, for which they paid $1,125 in property taxes for the first part of the year. On July 1st, they moved to their new home, 120 km away in adjacent city (assume a per km rate of $0.50), at 522 Orangewood Drive, Your City. The family did not stop for any meals when travelling and did not live in any temporary lodging. They paid Gentle Moves $2,500 for the transportation of their household and $100 for boxes and other moving supplies. 4 Fundamentals of Income Tax Case Study 2018 2018 H&R Block Canada, Inc. The old house, which they originally bought for $300,000 in Old City, was sold in July for $400,000. They paid $1,300 in legal fees related to the sale and a $20,000 commission to the real estate agent. They bought their new home for $450,000 and paid $1,750 for legal fees to purchase the home and $300 for transfer of the title. Property taxes on the new home for the last 6 months of the year amounted to $1,200. Their new home in Your City is 8 km from AA Consulting Inc and 12 km from ABC Inc. The old home was 122 km from AA Consulting Inc and 115 km from ABC Inc. Neither employer paid them anything to move to Your City. Before moving into the new home, the family had spent $15,000 from the mortgage to renovate the house in order to make it accessible for Chelseas wheelchair. These renovations did not increase the value of the house and they would not typically have been incurred by persons who do not have severe and prolonged mobility impairment. Sonja went back to work in September but in order to do so she required specialized job coaching; she also needed to purchase equipment and software to allow her to read print. During the first month she worked at ABC Inc., she paid for attendant care to help her get acclimatized to the job. She has a note from a doctor certifying that the special services were necessary in order to work and she has a prescription for the software and equipment. Altogether, these expenses came to $6,100 and Sonja has decided to claim them as disability supports and not medical expenses. In the fall, Jeremy and Sonja asked her mother, Shauna Davis, to come over on nights when both of them worked and keep an eye on the kids. Over that time, they paid her a token amount of $800 for this service. Shauna gave them two $400 receipts (one for Chelsea and one for Wayne) that included her Social Insurance Number. Shauna was the only child care provider they had last year. During the first part of the year, Derrick worked at the local mall and has a T4 from the Dollar Store. He has 6 months worth of monthly transit passes (January to June) from the Old City Transit Authority at the cost of $75 each. In the fall, Derrick attended university. He has a T2202A slip showing 4 months of full-time enrolment and tuition fees of $3,200. Derrick received a scholarship of $6,235 from the local university. Wayne earned $2,000 doing odd jobs during the summer. Last year, Sonja paid $1,500 to an orthodontist to fix Waynes teeth. Sonja has been supporting the Salvation Army for many years. Last year she contributed $350. All information slips are reproduced on the following pages. Based on the information provided here and on the T-slips, answer the questions on the pages that follow the information slips. Fundamentals of Income Tax Case Study 2018 5 2018 H&R Block Canada, Inc. 6 Fundamentals of Income Tax Case Study 2018 2018 H&R Block Canada, Inc. Fundamentals of Income Tax Case Study 2018 7 2018 H&R Block Canada, Inc. 8 Fundamentals of Income Tax Case Study 2018 2018 H&R Block Canada, Inc. Fundamentals of Income Tax Case Study 2018 9 2018 H&R Block Canada, Inc. 1. For each of the following income types and for each family member (if applicable): Itemize all amounts of this type (indicate who received it and how much). Determine how much income, if any, is required to be reported on a tax return. For each taxpayer, state the line(s) on the T1 or forms/Schedules on which this should be reported and the total amount to be reported. If any item is not reportable for tax purposes, write Nil and explain the reason why. a. Group sickness or accident insurance plan benefit b. WCB benefit c. Inheritance 10 Fundamentals of Income Tax Case Study 2018 2018 H&R Block Canada, Inc. d. Remuneration from employer (salaries, wages, taxable benefits, etc.) e. Strike pay f. Retirement allowance g. Scholarship Fundamentals of Income Tax Case Study 2018 11 2018 H&R Block Canada, Inc. h. Capital gain from sale of the house i. Odd jobs 2. Who should report the bank interest of $25 that each of the children received? Explain why. a. Chelsea: b. Wayne: c. Derrick: 12 Fundamentals of Income Tax Case Study 2018 2018 H&R Block Canada, Inc. 3. Who should report the $2,000 Jeremy had taken out of the RRSP that Sonja had contributed? And who can claim the withholding tax on the T4RSP? Explain why. 4. Jeremy, Sonja, and Derrick are all filing returns this year. For each of the following expense types: Itemize the claim (list all expenses of that type). State the total dollar amount, if any, which may be claimed and explain. Indicate on whose return it must be claimed: Jeremy, Sonja, or Derrick (if both Sonja and Jeremy are eligible to claim an item, write either). If any item cannot be claimed for tax purposes, explain why. a. Child care b. Moving expenses Fundamentals of Income Tax Case Study 2018 13 2018 H&R Block Canada, Inc. c. Spousal RRSP contribution d. Retiring allowance transfer to RRSP e. Charitable donation f. Disability supports 14 Fundamentals of Income Tax Case Study 2018 2018 H&R Block Canada, Inc. 4. g. Home accessibility expenses h. Medical expenses i. Home buyers amount j. Monthly transit passes Fundamentals of Income Tax Case Study 2018 15 2018 H&R Block Canada, Inc. k. Union dues 5. For each of the following boxes on Jeremys T4, please answer: What does this box represent? On which line will it go on the T1? If it is not to be entered on the T1, please state the reason why. a. Box 38: b. Box 39: c. Box 66: d. Box 67: 16 Fundamentals of Income Tax Case Study 2018 2018 H&R Block Canada, Inc. 6. Calculate Derricks total federal tuition amount. How much will he use on his return? What can he do with his unused amount, if any? Explain your answer. 7. Assume Jeremy will claim the children on his tax return. What is the maximum amount Jeremy can claim for each of the following? a. Canada caregiver amount for children under 18 years of age b. Disability amount transferred from a dependant (not a spousal transfer)