Leo is self-employed and is the sole proprietor of a medical supplies distribution business. The income statement for the business for the year ending December 31, 2020 is provided below. Statement of Income For the year ended December 31, 2020 Gross revenues $600,000 Cost of goods sold $100,000 Gross profit $500,000 Expenses: Accounting and Legal $16,600 Advertising 25,000 Bad debt 22,000 Annual business license 2,000 Amortization 8,000 Cycle Safety Program 1,000 Interest and bank charges 1,800 Meals and entertainment 11,000 Rent 26,000 Salaries and wages 155,000 Insurance 17,000 Convention 15,000 Reserve for obsolescence 14,000 Miscellaneous 3,000 Total expenses $317,400 Operating Income $182,600 Other non-operating items: Gain on sale of building $175,000 Net Income $357,600 Notes: A. Accounting and legal fees as follows: • Accrued fees of $500 for a pending lawsuit against the business for the sale of defective product. • An amount of $850 for the preparation of the 2020 tax return. • Interest and penalties of $250 for late filing of the 2019 tax return. • Lawyer fees totaling $3,000 related to Leo’s divorce from his third wife. • The purchase of a $12,000 computerized cash register. B. Insurance contained whole life insurance premium of $2,700 paid on the life of Leo. The beneficiaries of this policy are his two children. The remaining balance consists of $6,200 to insure the inventory and $8,100 to insure business assets. C. In calculating the cost of goods sold, opening inventories were valued at $184,000 while closing inventories for 2019 had been recorded at $201,900. This difference occurred due to a change from the weighted-average to the FIFO method of accounting for inventory. D. Meals and Entertainment expenses were as follows: • $490 for meals when Leo was too busy to make his own lunches to take to work. • $2,000 for five tickets to see the “Cirque du Soleil” with three clients and one of his kids. • Golf membership dues of $3,200 paid to the local golf club. Leo often does business with clients on the golf course. • The remaining balance was for meals consumed with clients while discussing business matters. E. Salaries included $22,000 paid to his 16 year old daughter for office work done throughout the year. This work used to be done by a bookkeeper in past years for the same amount of money. Salaries of $55,000 was also paid to Leo and included in the salaries and wages account. Also included was a $2,800 performance bonus declared to one of his employees for work done in 2020. The bonus will be paid in January of 2021. F. Last year a reserve for doubtful debts of $23,000 was claimed. This year after writing off a balance of $15,000 for bad debt write-offs, it has been determined that a $25,000 reserve would be appropriate. G. Advertising expenses included a balance of $6,000 for a series of ads printed in a US medical journal. This was done in order to boost sales of Leo’s medical supplies to US hospitals. Also included was an amount of $12,000 for print ads which will appear in various Canadian medical journals in 2021. Leo has also included $820 in the advertising cost for sponsoring local little league teams. Leo’s business logo has appear on the team uniforms. H. Included in the amortization expense is an amount of $8,000 for landscaping of the business premises. The total amount of $40,000 was paid in 2017 and is being amortized over the next 5 years. I. The Cycle Safety Program cost was for Leo, who is an active environmentalist and rides his bicycle to work every day. J. The interest account includes $1,100 of interest on a loan to purchase inventory as well as another $150 for the purchase of office furniture and fixtures. K. Leo attended three conventions during the year at a cost of $5,000 each. The cost of meals for each convention was determined to be $600. L. Leo uses his own car to visit clients. The following car expenses relate to 2020: • Gas and Oil $2,000 • Insurance 1,100 • License 190 • General repairs and maintenance 800 • Speeding fines 490 • Parking (all paid during business trips) 320 Leo purchased the car (Class 10.1, 30%) this year for $50,000. The car was driven a total of 40,000 km in 2020, 32,000 of which were for business purposes. None of these costs have been recorded in the financial statements. M. The miscellaneous account includes charitable donations of $1,000 made to a local charity as well as a $500 amount paid for pens and calendars which were distributed to clients for promotional purposes. N. The following balances were found in the various classes of depreciable asset on the books of the business: 

• Class 1, 4% (see (1) below) $120,000 

• Class 8, 20% 75,000 

• Class 10, 30% (trucks for transportation of goods) 40,000 

• Class 13, SL (see (2) below) 31,875 

• Class 14, SL (see (3) below) 57,800 Additional information and transactions during 2020: 

(1) The Class 1 undepreciated capital cost represents two buildings costing $150,000 each. One building was sold for $250,000. 

(2) The class 13 balance relates to a long-term lease on a warehouse for 30 years with an option to renew for a further 20 years. The original cost of the leasehold improvements in 2002 was $50,000. 

(3) Class 14 consists of a 20-year Copyright that was purchased for $68,000 on January 1, 2017 

(4) Purchases during the year: Ancillary equipment (Class 45, 45%) $50,000 Computerized cash register (Class 8, 20%) $12,000 O. Leo believes that some of his inventory is getting outdated and therefore may not be sold at regular selling prices. He has therefore taken a reserve in the amount of $14,000 to reflect this fact. 

Required: Calculate Leo’s minimum business income for taxation purposes for the year ended December 31, 2020 as well as any taxable capital gain or allowable capital loss resulting from the disposition of capital assets. In preparing your solution, ignore GST and PST implications.