George Pharmacy is a pharmaceutical salesman who has been very successful at his job in the last few years. Unfortunately, his family life has not been very happy. Three years ago, his only child, Anna, was driving a car that was hit by a drunk driver. She and her husband were killed and their 14 year old son, Kevin, was blinded in the accident. He also suffered extensive inju- ries to his jaw that have required major and prolonged dental work. George and his wife, Valerie, adopted Kevin. Valerie quit her part-time job to care for him. She also cares for her mother, Joan Drugstore who lives with them. Joan suffers from dementia, Parkinson's and severe depression. The family doctor has signed a letter stating that she is dependent on George and Valerie because of her impairments. Joan does not meet the residency requirements necessary to qualify for Canadian Old Age Security payments. Valerie's parents separated two years ago in Scotland after her father, David Drugstore, suffered enormous losses in the stock market. They were forced to sell their home and David moved to Chile. David phones periodically to request that money be deposited in his on-line bank account. George's brother, Martin, completed an alcohol rehabilitation program after being fired for drinking on the job. He is also living with George and Valerie while he is enrolled as a full time student at Western University. George is paying his tuition and Martin has agreed to transfer any available education related amounts to George. Although Martin plans to file his 2018 tax return, he has not done so yet. Kevin is taking several undergraduate psychology courses at Western University. After hearing a talk given by an expert blind echolocator, i.e., one who uses sound to locate objects, his goal is to become a researcher at the Brain and Mind Institute and study the use of echolocation. Other information concerning George for 2018 is given on the following pages. Required: With the objective of minimizing George's Tax Payable, prepare the 2018 income tax return of George Pharmacy using the ProFile tax software program assuming Valerie does not file a tax return. List any assumptions you have made, and any notes and tax planning issues you feel should be placed in the file. Ignore HST implications in your solution by assuming that George does not qualify for the GST/HST rebate. Personal Information Taxpayer Title First Name Last Name SIN Date of birth (Y/M/D) Marital Status Canadian citizen? Provide information to Elections Canada? Own foreign property of more than $100,000 Canadian? Mr. George Pharmacy 527-000-509 1954-07-02 Married Yes Yes No Taxpayer's Address 123 ZZZ Street, London, Ontario NOZ OZO Phone number (519) 111-1111 Family Members Spouse Child Mother-In-Law First Name Last Name SIN Date of birth (Y/M/D) Net income Valerie Pharmacy 527-000-483 1953-12-30 $6,520 in CPP Kevin Pharmacy 527-000-517 2002-10-17 Nil Joan Drugstore None 1933-02-24 $500 Father-In-Law Brother Family Members First Name Last Name SIN Date of birth (Y/M/D) Net income David Drugstore INone 1934-01-12 Nil Martin Pharmacy 527-000-533 1971-06-02 $8,300 During September, David was arrested in Chile. Valerie had to spend three weeks in Chile and pay $2,000 in bribes before she could get him released from jail. George had to pay Nannies On Call $3,500 for in-home help to take care of Kevin while she was gone. Box Amount T2202A (Martin) Tuition fees - for Martin Pharmacy (brother) Number of months in school - part-time Number of months in school - full-time A B 8,000 0 8 T2202A (Kevin) Box Amount Tuition fees - for Kevin Number of months in school - part-time Number of months in school - full-time B C 3,600 8 0 Am't Donor Charitable Donation Receipts Valerie Mothers Against Drunk Drivers (MADD) George Canadian Institute For The Blind (CNIB) 1,000 3,000 T4 Box Amount Issuer - Mega Pharma Inc. Employment income Employee's CPP contributions Employee's El premiums Income tax deducted Employment commissions Charitable donations 14 16 18 22 42 46 378,000.00 2,593.80 858.22 114,000.00 82,000.00 400.00 During 2018, Mega reimbursed George $3,788 for meals and entertainment with clients, $2,268 for hotels and $4,925 for airline tickets. In addition to George's salary, he also earns commissions. His employer requires him to have an office in his home and has signed the form T2200 each year to this effect. On October 1, 2018, George purchased a new computer and software that will be used solely in his home office for employment related uses. The computer cost $3,600 and the various software programs cost $1,250. House Costs Area of home used for home office (square feet) Total area of home (square feet) Telephone line including high speed internet connection Hydro Insurance - House Maintenance and repairs Mortgage interest Mortgage life insurance premiums Property taxes 650 5,000 620 3,200 4,000 3,800 6,200 400 6,700 (Y/M/D) Patient Medical Expenses Description Am't 2018-12-31 George Johnson Inc. Out of Canada insurance 731.00 2018-08-31 George Dr. Smith Dental fees 155.40 2018-09-19 George Optician Prescription glasses 109.00 2018-11-07 Valerie Pharmacy Prescription 66.84 2018-06-07 Joan Dr. Wong Psychiatric counseling 2,050.00 2018-03-22 David Tropical Disease Centre Prescription 390.00 2018-12-20 Martin Dr. Walker Group therapy 6,000.00 2018-10-01 Kevin Dr. Takarabe Orthodontics and Dental 30,000.00 George paid $800 for the care and feeding of Kevin's seeing eye dog, Isis, during 2018. George Pharmacy is a pharmaceutical salesman who has been very successful at his job in the last few years. Unfortunately, his family life has not been very happy. Three years ago, his only child, Anna, was driving a car that was hit by a drunk driver. She and her husband were killed and their 14 year old son, Kevin, was blinded in the accident. He also suffered extensive inju- ries to his jaw that have required major and prolonged dental work. George and his wife, Valerie, adopted Kevin. Valerie quit her part-time job to care for him. She also cares for her mother, Joan Drugstore who lives with them. Joan suffers from dementia, Parkinson's and severe depression. The family doctor has signed a letter stating that she is dependent on George and Valerie because of her impairments. Joan does not meet the residency requirements necessary to qualify for Canadian Old Age Security payments. Valerie's parents separated two years ago in Scotland after her father, David Drugstore, suffered enormous losses in the stock market. They were forced to sell their home and David moved to Chile. David phones periodically to request that money be deposited in his on-line bank account. George's brother, Martin, completed an alcohol rehabilitation program after being fired for drinking on the job. He is also living with George and Valerie while he is enrolled as a full time student at Western University. George is paying his tuition and Martin has agreed to transfer any available education related amounts to George. Although Martin plans to file his 2018 tax return, he has not done so yet. Kevin is taking several undergraduate psychology courses at Western University. After hearing a talk given by an expert blind echolocator, i.e., one who uses sound to locate objects, his goal is to become a researcher at the Brain and Mind Institute and study the use of echolocation. Other information concerning George for 2018 is given on the following pages. Required: With the objective of minimizing George's Tax Payable, prepare the 2018 income tax return of George Pharmacy using the ProFile tax software program assuming Valerie does not file a tax return. List any assumptions you have made, and any notes and tax planning issues you feel should be placed in the file. Ignore HST implications in your solution by assuming that George does not qualify for the GST/HST rebate. Personal Information Taxpayer Title First Name Last Name SIN Date of birth (Y/M/D) Marital Status Canadian citizen? Provide information to Elections Canada? Own foreign property of more than $100,000 Canadian? Mr. George Pharmacy 527-000-509 1954-07-02 Married Yes Yes No Taxpayer's Address 123 ZZZ Street, London, Ontario NOZ OZO Phone number (519) 111-1111 Family Members Spouse Child Mother-In-Law First Name Last Name SIN Date of birth (Y/M/D) Net income Valerie Pharmacy 527-000-483 1953-12-30 $6,520 in CPP Kevin Pharmacy 527-000-517 2002-10-17 Nil Joan Drugstore None 1933-02-24 $500 Father-In-Law Brother Family Members First Name Last Name SIN Date of birth (Y/M/D) Net income David Drugstore INone 1934-01-12 Nil Martin Pharmacy 527-000-533 1971-06-02 $8,300 During September, David was arrested in Chile. Valerie had to spend three weeks in Chile and pay $2,000 in bribes before she could get him released from jail. George had to pay Nannies On Call $3,500 for in-home help to take care of Kevin while she was gone. Box Amount T2202A (Martin) Tuition fees - for Martin Pharmacy (brother) Number of months in school - part-time Number of months in school - full-time A B 8,000 0 8 T2202A (Kevin) Box Amount Tuition fees - for Kevin Number of months in school - part-time Number of months in school - full-time B C 3,600 8 0 Am't Donor Charitable Donation Receipts Valerie Mothers Against Drunk Drivers (MADD) George Canadian Institute For The Blind (CNIB) 1,000 3,000 T4 Box Amount Issuer - Mega Pharma Inc. Employment income Employee's CPP contributions Employee's El premiums Income tax deducted Employment commissions Charitable donations 14 16 18 22 42 46 378,000.00 2,593.80 858.22 114,000.00 82,000.00 400.00 During 2018, Mega reimbursed George $3,788 for meals and entertainment with clients, $2,268 for hotels and $4,925 for airline tickets. In addition to George's salary, he also earns commissions. His employer requires him to have an office in his home and has signed the form T2200 each year to this effect. On October 1, 2018, George purchased a new computer and software that will be used solely in his home office for employment related uses. The computer cost $3,600 and the various software programs cost $1,250. House Costs Area of home used for home office (square feet) Total area of home (square feet) Telephone line including high speed internet connection Hydro Insurance - House Maintenance and repairs Mortgage interest Mortgage life insurance premiums Property taxes 650 5,000 620 3,200 4,000 3,800 6,200 400 6,700 (Y/M/D) Patient Medical Expenses Description Am't 2018-12-31 George Johnson Inc. Out of Canada insurance 731.00 2018-08-31 George Dr. Smith Dental fees 155.40 2018-09-19 George Optician Prescription glasses 109.00 2018-11-07 Valerie Pharmacy Prescription 66.84 2018-06-07 Joan Dr. Wong Psychiatric counseling 2,050.00 2018-03-22 David Tropical Disease Centre Prescription 390.00 2018-12-20 Martin Dr. Walker Group therapy 6,000.00 2018-10-01 Kevin Dr. Takarabe Orthodontics and Dental 30,000.00 George paid $800 for the care and feeding of Kevin's seeing eye dog, Isis, during 2018