Martha and Jess Samuelsson are sisters with extensive experience in practicing law. Until recently, they have each worked for separate firms in the Regina region. After years of urging from their mother, they have concluded that they could significantly improve their incomes and the quality of their client base if they work together in a partnership arrangement. As a result, as of January $1,20$XX$,$ they begin practicing law for the Samuelsson & Samuelsson Partnership.

Based on their partnership agreement and on the projected amount of billable hours each sister will bring to the business, Martha will be entitled to a salary of $$110,000$ per year, while Jess's salary will be $$90,000.$ In addition, Jess will receive interest at $7\%$ on her average capital balance for the year. The salary and interest amounts are withdrawn by the partners during the year. Due to large rental loss carry forwards that each sister is claiming, neither partner has Taxable Income that will be taxed federally at $33\%$ in $20$XX$.$

Subsequent to the priority allocations for salaries and interest, any residual Net Business Income will be allocated $60\%$ to Martha and $40\%$ to Jess.

Capital Gains: As Jess has contributed the majority of the partnership initial capital, she will be entitled to all capital gains that are recognized by the partnership.

Dividends: Any dividends received by the partnership will be split equally between the two partners. The federal gross$-$up is $38\%$ on eligible dividends and the federal dividend tax credit is $6/11$ of the gross$-$up$.$

For the year ending December $31,20$XX$,$ their results, prepared on a GAAP basis, are as follows: Samuelsson & Samuelsson Partnership Income Statement

Fiscal Period Ending December $31,20$XX

Note $1$: Accounting amortization is based on ASPE. The sisters intend to deduct maximum CCA of $$21,$XXX$.$

Note $2$: The charitable donations will be allocated equally to each sister. Neither sister made any other charitable donations during the year.

Note $3$: The accounting gains on sales of investments are equal to the capital gains.

Required:

A$.$ Calculate the amounts of income from the partnership that would be included in the Net Income For Tax Purposes of each of the two sisters. $(25$ marks$)$

B$.$ Indicate the amount of any federal tax credits that each of the two sisters would be entitled to as a result of allocations made by the partnership at December $31,20$XX$.(5$ marks$)$

Ignore GST and PST considerations.