Michelle Huang runs a rapidly expanding cosmetics store in Penticton as a sole-proprietorship. She has provided you with the following information:

Income statement To Dec 31, 2019

Sales $ 520,000

COGS $ (350,000)

Gross profit $ 170,000

Sales, general & admin $ (60,000)

Amortization $ (20,000)

loss on sale of building $ (15,000)

Net income before income tax $ 75,000

Provision for income taxes $ (13,000)

Net income after income taxes $ 62,000

Other information:

(a) The fixed assets information for the company is as follows:

a. UCC balances at January 1, 2019 were as follows:

i. Class 1 (Single building) $200,000

ii. Class 8 (Multiple assets) $ 60,000

iii. Class 10 (Multiple assets) $ 80,000

b. During the year Michelle had the following transactions:

i. On September 8th, 2019 a new building was purchased for $700,000. The cost of the related land was an additional $400,000. It cost $20,000 to pave part of the land for use as a parking lot, for accounting purposes the $20,000 was added to the cost of the land. Although she will be using most of the building for her business it qualifies as a rental property for CCA purposes. Her first tenant began renting at the end of December and she included the amount in sales. This problem is very loosely based on a Wolters Kluwer textbook question

ii. On December 8th, 2019 the original building was sold for $220,000. The original cost of the building was $400,000 and the net book value was $235,000.

iii. New furniture and fixtures were purchased for $25,000 on October 15th, 2019. This purchase replaced office furniture which was sold for its $4,000 net book value (original cost $10,000)

(b) Michelle is eligible for the personal and spousal tax credits. Her spouse's NITP for the year is $3,000.

(c) She contributed $13,000 to her RRSP in June 2019. The entire amount is deductible.

(d) The $13,000 accounting provision for income taxes has not yet been paid.

(e) Michelle has a non-capital loss of $25,000 and a net capital loss of $5,000 available from her 2018 tax return.

Michelle's UCC at Jan 1, 2020 after considering additions, disposals and

CCA for 2019:

Class 1: Single Building

UCC(Start) = 330,000

CCA = (13,200)

UCC(End of Year) = 316,800

Class 8: Multiple Assets

UCC(Start) = 68,500

CCA = (13,700)

UCC(End of Year) = 54,800

Class 10: Multiple Assets

UCC(Start) = 80,000

CCA = (24,000)

UCC(End of Year) = 56,000

Please do the following (and ignore provincial taxes and provincial credits):

1. Calculate Michelle's net income for tax purposes using the S3 ordering rules