Jean Walls owns a scuba-diving business (sole proprietorship) in Prince Rupert, BC. She is 45 years old, married and has 2 kids (age 13 & 16). Her husband Jack is a local painter and poet and has Net Income for Tax Purposes of $7,500 from his painting and poetry business in 2019.

Jean has a background in accounting and prepares her financial statements in accordance with GAAP. Her net income for accounting purposes was $122,000 in 2019 and included the following:

• $ 4,000 gain on the sale of boat used in her business
• $18,000 meals and entertainment expenses
• $12,000 amortization
• $ 3,000 for a holiday retreat for her and Jack to celebrate their anniversary.
• $ 5,000 in penalties from the ministry of fisheries and wildlife

Her UCC balances at the beginning of 2019 were as follows:

• Class 7: $45,000
• Class 8: $20,000

During 2019 her business had the following capital transactions:

• She purchased some scuba diving equipment for $15,000
• She sold her old boat for $47,000. It had a net book value of $43,000 and originally cost $50,000.
• Purchased her new boat (imported from the U.S.A.) for $65,000
• She sold all of the class 8 items during the year for $9,000.

She is calculating the employment income for her only employee (Sal Teephish). Sal received the following from the business during the year:

• $45,000 gross salary
• $700 prepaid visa gift card as a reward for being an employee for 10 years.
• $600 tuition paid for an advanced scuba diving instructor course

Other activity in the year

• She received a $6,000 non-eligible dividend during the year.
• Her kids go to a 2-week poetry and painting camp each summer. This year, the camp cost $600 per week for each child.
• She gave a $700 charitable donation to Greenpeace. She donates to Greenpeace every year.
• She paid $8,000 in federal income tax instalments to CRA during the year.
• She has a $5,000 net capital loss available from a bad investment in 2016.

Requirements

• Using S(3) format calculate Jeans net federal tax payable for the year
• Calculate Sals employment income for the year (including any benefits)
• Clearly state any other issues you can think of (tax planning, additional information needed etc.)