It is February of 2024, you, CPA, were about to meet with your new clients, Nicole and Joe. They have come to discuss their tax situation with you. They predict that Nicole will not have to pay taxes for the 2023 year, which they believe will allow Joe to claim the non-refundable tax credit of spouse credit. They have provided you with the following information, including the statements from their companies (see Exhibits I and II) which they have prepared themselves. Joe would also like to know the tax liability for his corporation, 123456 Ontario Ltd. Facts Nicole and Joe have been married for ten years. They are both 39 years old, and they have three children under the age of five. Their children attended daycare four mornings a week during 2023 while they worked. The total cost of the daycare for all three children was $2,400. Nicole and Joe receive the monthly Canada child benefit for each child. Joe Joe is the sole shareholder and manager of 123456 Ontario Ltd., a local furniture manufacturing plant. He earns a pre-tax salary of $75,000 per year from 123456 Ontario Ltd. Joe received the following benefits from 123456 Ontario Ltd. in 2023: Private health and dental care: $500 Life insurance: $600 $2,500 worth of products at cost Registered pension plan (RPP) contributions: $3,300 (123456 Ontario Ltd. also deducted $3,300 from Joes salary, which was Joes contribution to his RPP) Joe contributed $1,800 to his RRSP for the 2022 taxation year (which is within his allowable limit). In 2022, Joe borrowed $10,000 from the bank to purchase a set of collectible coins for $12,000. In 2023, Joe was able to sell the coins for $20,000, and he incurred interest expense of $800 and $600 for year 2022 and 2023, respectively. Nicole Nicole began part-time employment at Fitness Inc. in 2023, and earned a gross salary of $25,000. She did not have any employment income the previous year. Nicole received free use of the owners cottage for two weeks in May, which is typically rented out for $700 per week. She began a small home-based proprietorship - Nicoles Consulting in 2022 - which generated $300 a month in pre-tax profits in 2023. The business operates from a 200 square foot room in the familys 2,000 square foot home, and is used exclusively for the business. Nicole did not file a tax return in 2022 since she did not owe any taxes. According to Nicole, she has been contributing the maximum amount to her TFSA. At the beginning of January 2023, she withdrew $1,000 from her TFSA account. Overall, Nicole contributed $7,000 to her TFSA in 2023 Exhibit I 123456 ONTARIO LTD. The 2023 and 2022 annual financial statements for 123456 Ontario Ltd. (prepared by Joe) are as follows: 2023 2022 Revenue from manufacturing and sales $2,000,000 $2,300,000 Dividend income from a taxable Canadian corporation 0 9,000 Investment interest income 2,000 6,000 Cost of goods sold 1,300,000 1,500,000 Gross profit $702,000 $815,000 Salaries and wages 300,000 350,000 Other administrative costs 250,000 300,000 Net income before interest and amortization $152,000 $165,000 Interest expense 10,000 10,000 Amortization 15,000 15,000 Net income after interest and amortization $127,000 $140,000 Other information Capital cost allowance calculations totaled $18,500 in 2022 and $19,800 in 2023. In 2023, a bonus was announced for Joes key employee, equal to a total of 1% of the 2022 annual revenue from manufacturing and sales. The bonus has been structured to be distributed in two equal payments during 2024 on January 31st and November 30th, and has been included in the 2023 salaries and wages. Cost of goods sold and other administrative costs adhere to the rules of the Income Tax Act. Interest expense is compliant with paragraph 20(1)(c) of the Income Tax Act. All of the companys revenue from manufacturing and sales is from active business. The dividends were received from a public corporation, of which 123456 Ontario Ltd. owns less than 1% of the shares. In 2022, the Company disposed a property and reported a taxable gain of $200,000 in 2022 tax return. The purchaser paid the remaining balance of $60,000 in 2023. 123456 Ontario Ltd did not pay any dividends in 2023. Exhibit II Nicoles Consulting The 20230 and 2022 annual financial statements for the business (prepared by Nicole) are as follows: 2023 2022 Revenue $22,050 $13,400 Administrative expenses (Note 1) 14,000 12,550 Owner's salary 3,600 2,400 Work space in the home (Note 2) 1,450 1,450 Net income (loss) $3,000 $(3,000) Note 1: All of the administrative expenses are compliant with the rules of the Income Tax Act. Note 2: Work space expenses represent ten percent of Nicole and Joes housing costs. The total housing costs include utilities of $2,400, mortgage interest of $8,400, property taxes of $2,500, and home insurance of $1,200. (The business has met the conditions necessary to allow for the deduction of home-based business expenses) REQUIRED (Use tax rules applicable for 2023) Prepare the calculations (in accordance with section 3 of the Income Tax Act) to determine the net income for tax purposes and taxable income for both Nicole and Joe for 2023