Introduction BUSI 355 Comprehensive Case Assessment Summer 2020 You have been presented with some tax information from your client, Anouk Barris, the 100% shareholder of Zinger Distillery Ltd., (ZDL) who asked for your advice in determining both her 2019 and ZDL's 2020 taxable income and taxes payable for their respective taxation years. As the filing requirements are urgent, you will need to have this file completed by June 22, 2020. Purpose of the Assignment The purpose of the assignment is to incorporate the following elements: 1. Application of course concepts, Canadian Income Tax legislation, and court rulings to real- world taxation issues and scenarios. 2. Further development of analytical, problem-solving, and written business communication skills. 3. Increased working knowledge of Excel worksheet preparation. General Requirements and Assumptions You are required to determine both Anouk's and ZDL's Net Income for Tax Purposes by providing a breakdown of the various categories of income according to the Ordering Rules in Section 3 of the Income Tax Act. In addition, taxable income and taxes payable must also be determined using the information provided. The results must be communicated in a one page memo to each client separately. Word document - instructions  Attractive Cover Page (File Cover) for your report (to be presented to your clients).  Use report format for content.  Contents - a one page memo to your clients outlining the net results of your review. You will need to provide specific details that you feel will help your clients gain a better understanding of how taxes payable were determined. You will need to identify the total taxes owing and a description of how you were able to determine them. Remember, your clients may not have a good understanding of the Income Tax legislation, so keep this in mind when preparing your memo. A sample memo format has been provided in Canvas. Excel workbook - instructions  The Excel worksheets are required for organizing your client's net income for tax purposes, taxable income, and taxes payable calculations according to the relevant provisions.  All your planning assumptions are to be in one workbook (in a single Excel file.)  Do not place more tables on any one worksheet than can be printed attractively on a single page. You will probably use several worksheets for your planning assumptions (like tax rates, capital gains rates, etc).  Change the name on the tabs of the worksheets you use for your planning tables to indicate the Table number and name (i.e. Table 1: Employment Income). You should have one table per subsection ( i.e. Employment Income, Business Income, etc as well as a summary tab).  Give each worksheet in your workbook a header with your name on the left, and indicate the purpose of the worksheet.  Feel free to use colors and shading to enhance appearance and readability of your tables. 1    Never enter a number in more than one location. For example, if you have calculated the total employment income in the Employment Income table and need that number again in your Summary sheet, use a formula in the summary sheet to link to the original number's location in the Employment Income table (i.e. =$C$18)  Use View, Page Layout to check that sheets will print readably and attractively. Marking Guide Grading Criteria This is an individual assignment worth 30% of the grade for the course Your report will be graded based on the following criteria:  A one page client summary section for each client that presents the main issues related to the tax results including the identification of and discussion about the determination of the various sources of income.  Excel spreadsheets supporting your income calculations.  Referencing - complete and correct.  Writing and English grammar - accurate, clear, and well organized Format and Referencing (10 points)  Arial, Times, or Verdana font, size 11 point, 1.5 line spacing  Professional/business writing style (third person, without grammatical and/or spelling errors)  Reference all assignment material taken from other sources, including ideas, facts, and concepts. Marks will be lost for improper or omitted referencing. Please include both in-text references and a bibliography. Electronic Spreadsheet(s) (55 points)  Comprehensive (includes all requirements)  Flexible and 'linked' throughout  Include all important items  Organized and logical  Clear planning assumptions  Attractively, appropriately, and consistently formatted Submission  Electronic copy to be uploaded to Canvas by the assignment due date/time.  Due date: On or before 11:30 pm (PDT) Monday, June 22nd, 2020. Total Marks /65 2   Client Information Zinger Distillery Ltd., (ZDL), a Canadian Controlled Private Corporation (CCPC), is a Vancouver Island based popular gin and vodka distiller. New to its line of products is hand sanitizer that was introduced in response to the COVID-19 pandemic induced market shortages. As demand continues to surge for this product, it will continue to be a regular product produced in house. ZDL is experiencing enormous growth the past two years and is planning to expand in 2021. BGL's increased popularity is due to its trendy location, artistic and funny labels, and community based charitable involvement. At July 31, 2020, the company's year-end, all of the outstanding shares were owned by Anouk Barris, the founder of ZDL. Financial statements for the year ended July 31, 2020, report a net income before tax of $490,000. You have been retained to estimate the corporation's income tax liability and provide advice on other tax matters and have gathered the information outlined in Exhibit 2-1. EXHIBIT 2-1 ZINGER DISTILLERY LTD. 2020 Financial Information 1. Zinger's net income for tax purposes is summarized as follows:  Income from manufacturing operation Interest on bond Interest on overdue account Dividend income  PPR Inc. $ 450,000 10,000 4,000 26,000 $ 490,000   2. Zinger owns 40% of the voting shares of PPR Inc., a CCPC. In 2020, PPR earned $150,000 of active business income, paid a total dividend of $50,000, and received a dividend refund of $8,000. Of Zinger's $20,000 dividend, $5,000 was designated as a capital dividend. In 2020, Zinger's manufacturing and processing income for tax purposes was $300,000. 3. A review of Zinger's 2019 corporate tax return provides the following information: Non-capital losses carried forward Capital dividend account RDTOH Undepreciated capital cost: Class 8 Class 10.1 Class 3 Class 12 Class 13 $ 10,000 NIL 6,000 12,000 25,500 30,000 4,000 41,000 3   4. Zinger's income statement for the year ended July 31, 2020, included the following: Amortization Appraisal fee for fixed assets for insurance Reserve for retroactive wage increase Interest and penalties on late filing of last year's income tax return Shipping cost for the machine (see note 6 below) Legal fees Advertising and promotion  Legal fees included $400 for preparing corporate minutes, $5,000 for representation at a government review of sales tax, and $1,000 for issuance of shares.  Promotional expenses included $10,000 to maintain a leased yacht for the entertainment of major customers. 5. Manufacturing is done on leased premises under a 5-year lease that expires in 2021. The lease permits two 3-year renewable options. Zinger spent $50,000 on leasehold improvements when the original lease was signed. 6. In March 2020, Zinger purchased a new manufacturing machine for $60,000. In July 2020, Zinger sold its entire display fixture for $15,000 (original cost $25,000) and acquired new office furniture for $40,000. 7. On April 1, 2020, Zinger paid $4,000 for a 1-year supply of office stationery. 8. On July 1, 2020, Zinger purchased a licence for $30,000 to sell a new product. This licence expires on June 30, 2029. 9. During the year, the company paid $12,000 as a lease payment for the automobile used by Anouk (ignore GST/PST/HST). This vehicle was available to Anouk throughout the fiscal year. 10. Bad debt expenses included a $6,000 loan given to a supplier, MMP Corporation, a small business corporation (SBC). MMP declared bankruptcy and there is no chance of any recovery. 11. The company made a contribution of $10,000 to the employees' deferred profit sharing plan. 12. On June 1, 2020, the company invested $15,000 in a 2-year bank GIC. Interest of 5% was payable annually on the anniversary date. In 2020, no interest income was recorded for accounting purposes. 13. The company declared and paid a dividend of $20,000. 14. The president of the company wants to transfer some capital property to his wife. He is not clear about income attribution rules. Anouk is employed as ZDL's VP Operations that oversees the retail sales and distilling and bottling site. She has requested your assistance in preparing her 2020 income tax return and your advice on certain other tax matters. $ 15,000 500 25,000 1,500 2,000 6,400 20,000 4   Information regarding Anouk's financial activities for 2019 is outlined in Exhibit 3-1. EXHIBIT 3-1 Anouk Barris 2019 Financial Information 1. In 2019, Anouk's salary from ZDL was $110,000. From this salary, ZDL deducted income tax of $11,000, and maximum CPP and EI contributions. ZDL contributed $2,500 to the registered pension plan on Anouk's behalf, and she made a matching contribution of $2,500. XY also contributed $600 for group term insurance for her. 2. Anouk sold her shares of SS Ltd., a CCPC, in December 2019 for $20,000 (original cost $10,000). She received $9,000 in cash with the remaining amount payable in December 2020. In 2018, Anouk acquired 100 shares of BB Inc., a CCPC, for $2,000. She also acquired an additional 50 shares for $26 each in 2019. In June 2019, she received a dividend of $200 from BB Inc. In November 2019, she sold all her BB shares for $66 each. All of BB's assets are used in an active business. 3. In February 2017, Anouk loaned $10,000 to ZBL, A CCPC. Due to financial difficulties, the CCPC has not paid any interest. In 2018, Anouk had included the accrued interest of $1,000 in her net income for tax purposes. It is now clear that the loan and interest are uncollectible. None of the company's assets are used in an active business. 4. On November 1, 2019, Anouk had to move from Edmonton to Vancouver Island to be closer to her company operations and employment duties. She incurred the following costs: Cost of moving her possessions $ Cost of three visits in a search for appropriate accommodation (this amount was reimbursed by her employer) Lease cancellation cost for her residence in Toronto Cost of legal services related to new accommodation 5. In 2019, Anouk had the following additional receipts and disbursements: 3,000 1,500 5,000 3,000 Interest paid for a desktop computer (personal use) Investment counselling fee Contribution to an RRSP Contribution to a tax-free savings account Donation to a municipal election candidate Disability insurance premium Lottery winnings Dividend from HH Public Ltd. 6. Anouk is single. $ 300 400 10,000 5,000 100 1,000 5,000 1,000 5   Required - Using the Excel template provided, submit the following: Part 1 - ZDL a. Under Part I of the Income Tax Act, calculate Zinger Distillery Ltd.'s minimum net income for tax purposes and minimum taxable income for the 2020 taxation year in accordance with the ordering provisions found in section 3 of the Income Tax Act. b. Based on your answer to part (a), calculate the minimum Part I and Part IV federal income tax, and RDTOH for the 2020 taxation year. c. Referring to item 14 in Exhibit 2-1, identify any three (3) specific conditions mentioned in the Income Tax Act that must be fulfilled before the taxpayer will be exempted from the attribution rules. No explanation is required. Part 2: Anouk Barris a. Calculate Anouk's minimum net income for tax purposes in accordance with the ordering provisions found in section 3 of the Income Tax Act, and her minimum taxable income for the 2019 taxation year. b. Based on your answer to part (a), calculate Anouk's minimum federal income tax for the 2019 taxation year. Show all calculations. 

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