Mr. Musician earned 16500 for work as a house pianist at the loose moose pub....

Mr. Musician's mother, Eunice, was born on April 10, 1932, and his father, Earl, was born on November 16, 1930. They both live with Mr. Musician and his wife. While his father has some mobility issues, he is not infirm. His mother is legally blind. Eunice Musician had income of $9,500 for the year, while Earl Musician had income of $7,500. Other information concerning Mr. Musician and his family for 2019 is as follows: 1 Mr. Musician earned $16,500 for work as the house pianist at the Loose Moose Pub. His T4 showed that his employer withheld $500 for income taxes and $287.30 for El. No CPP was withheld as he has previously filed an election to stop contributing to the CPP. 2. During the year, Mr. Musician made his annual $3,000 donation to Planned Parenthood Of Canada, a registered Canadian charity. 3. Mr. Musician has been married before to Lori Musician (SIN 527-000-319). Lori is 52 years old and lives in Fort Erie, Ontario. 4. Mr. Musician has two additional children who live with their mother, Ms. Dolly Nurse (SIN 527-000-582), in Burnaby, British Columbia. The children are Megan Nurse, aged 12, and Andrew Nurse, aged 14. Neither child has any income during 2019. While Ms. Nurse and Mr. Musician were never married, Mr. Musician acknowledges that he is the father of both children. Although Buddy has provided limited financial aid by paying their dental and medi- cal expenses, the children are not dependent on Buddy for support. 5. Mr. Musician wishes to claim all his medical expenses on a calendar year basis. On Decem- ber 2, 2019, Mr. Musician paid dental expenses to Canada Wide Dental Clinics for the fol- lowing individuals: Himself $1,200 Natasha (wife) 700 Richard (adopted son) 800 Sarah (adopted daughter) 300 Linda (daughter) 100 Earl (father) 1,050 Lori (ex-wife) 300 Dolly Nurse (mother of two of his children) 675 Megan Nurse (daughter of Dolly Nurse) 550 Total $5,675 6. M. Musician signed a contract with Fred Nesbitt on January 13, 2019, to do permanent modifications to his house. The contract was for the installation of ramps with sturdy hand railings outside his front and back doors to give his parents easier access to the house and modifications to their bathroom so they would be less likely to fall when using the shower. The contract price was $5,800. As neither of his parents has a severe and prolonged mobil- ity impairment, these expenditures are not eligible medical expenses. 7. Mr. Musician paid four quarterly instalments of $1,000 each (total of $4,000) for 2019, as requested on his Instalment Reminders from the CRA. He paid each instalment on the due date, 8. Mr. Musician receives $7,271.67 in Old Age Security payments and $5,500 in Canada Pen- sion Plan "retirement benefit" payments over 12 months. There was no tax shown as with- held on his TAA(OAS) or his T4A(P). 9. Mr. Musician builds a state-of-the-art home theatre in a new extension of his home. In order to finance it, he sells stock in his RRSP and withdraws the funds from his RRSP His T4RSP showed $52,000 in withdrawals from the House of Rock Bank (Box 22) and total tax of $15,600 deducted from these payments. 10. Several of Mr. Musician's songs, including his outstanding hit "Drop Kick Me Jesus Through The Goal Posts Of Life have provided him with substantial royalty payments over the years. Tax Software Assignment Problems In 2019, the Never Say Die Record Company paid him $78,000 in royalty payments. Nota was issued by the company. 11. Worder to ensure the financial security of his family, Mr. Musician decided to return to song writing in earnest. On November 1, 2019, he rented a small, quiet studio for $700 a month and purchased a Roland electric piano for $7,750 that was delivered there. He does not plan to use the space or piano for personal enjoyment, only for composing. 12. The previous year, on January 2, 2018, Mr. Musician elected not to make any further CPP contributions on his self-employed income. 13. Mr. Musician is required by a court order to pay spousal support of $400 per month to his former spouse, Lori Musician. Mr. Musician made spousal support payments of $4.800 dur ing 2019. 14. Mr. Musician is required by a court order to make child support payments of $350 per month to Dolly Nurse for his two children, Megan and Andrew Nurse. A total of $4 200 was ao during the year. 15. Mr. Musician made contributions to the federal Liberal Party in the amount of $610 during the year. 16. Mr. Musician made a $5,000 contribution to his TFSA during the year. Thanks to the exce ent investing advice of his gardener, the balance in his TFSA account has grown to more than $175,000 by the end of the year. Required: With the objective of minimizing Mr. Musician's Tax Payable, prepare Mr. Musicians 2019 income tax return using the Profile tax software program assuming Natasha does not file a tax return. List any assumptions you have made and any notes and tax planning issues you feel should be placed in the file. Tax Software Assignment Problem Eleve This problem is an expansion of the Chapter 4 problem. DISCLAIMER: All characters appearing in this problem are fictitious. Any resemblance to real persons, living or dead, is purely coincidental. the last few years. Unfortunately, his family life has not been very happy. Three years ago, his only chile, Anna, was driving a car that was hit by a drunk driver. She and her husband were killed and their 14 year old son, Kevin , was blinded in the accident. He also suffered extensive injuries to his jaw that have required major and prolonged dental work. George and his wife, Valerie, adopted Kevin. Valerie quit her part time job to care for him. She also cares for her mother, Joan Drugstore, who lives with them. Joan suffers from dementia, Par kinson's, and severe depression. The family doctor has signed a letter stating that she is dependent on George and Valerie because of her impairments. Joan does not meet the residency require- ments necessary to qualify for Canadian Old Age Security payments. Valerie's parents separated two years ago in Scotland after her father, David Drugstore, suffered enormous losses in the stock market. They were forced to sell their home and David moved to Chile. David phones periodically to request that money be deposited in his online bank account. George's brother, Martin, completed an alcohol rehabilitation program after being fired for drink- ing on the job. He is also living with George and Valerie while he is enrolled as a full time student at Western University. George is paying his tuition and Martin has agreed to transfer any avail- able education related amounts to George. Although Martin plans to file his 2019 tax return, he has not done so yet. Tax Software ASSIS 1 Kevin is taking several undergraduate psychology courses at Western University. After hearing a talk given by an expert blind echolocator (one who uses sound to locate objects), his goal is to become a researcher at the Brain and Mind Institute and study the use of echolocation. Other information concerning George for 2019 is given on the following pages. Required: Prepare the 2019 income tax return of George Pharmacy using the Profile tax soft ware program assuming Valerie does not file a tax return List any assumptions you have made and any notes and tax planning issues you feel should be placed in the file. Ignore HST implica- tions in your solution by assuming that George does not qualify for the GST/HST rebate. Personal Information Title First Name Last Name SIN Date of birth (Y/M/D) Marital Status Canadian citizen? Provide information to Elections Canada? Own foreign property of more than $100,000 Canadian? Taxpayer Mr. George Pharmacy 527-000-509 1955-07-02 Married Yes Yes No Taxpayer's Address 123 ZZZ Street, London, Ontario NOZ OZO Phone number (519) 111-1111 Child Mother-In-Law Spouse Family Members First Name Last Name SIN Date of birth (Y/M/D) Net income Valerie Pharmacy 527-000-483 1954-12-30 $6,520 in CPP Kevin Pharmacy 527-000-517 2003-10-17 Nil Joan Drugstore None 1934-02-24 $500 Father-In-Law Brother Family Members First Name Last Name SIN Date of birth (Y/M/D) Net income David Drugstore None 1935-01-12 Nil Martin Pharmacy 527-000-533 1972-06-02 $8,300 During September, David was arrested in Chile. Valerie had to spend three weeks in Chile and pay $2,000 in bribes before she could get him released from jail. George had to pay Nannies On Call $3,500 for in-home help to take care of Kevin while she was gone. 70 Chapter 11 Tax Software Assignment Problems Box Amount 8,000 A B T2202A - (Martin) Tuition fees - for Martin Pharmacy (brother) Number of months in school - part time Number of months in school - full time 0 8 Box Amount A 3,600 B 8 T2202A - (Kevin) Tuition fees - for Kevin Number of months in school - part time Number of months in school - full time 0 Am't Donor Charitable Donation Receipts Mothers Against Drunk Drivers (MADD) Canadian Institute For The Blind (CNIB) 1,000 3,000 Valerie George Box Amount T4 14 16 18 Issuer - Mega Pharma Inc. Employment income Employee's CPP contributions Employee's El premiums Income tax deducted Employment commissions Charitable donations 378,000.00 2,748.90 860.22 114,000.00 82,000.00 400.00 22 42 46 During 2019, Mega reimbursed George $3,788 for meals and entertainment with clients, $2,268 for hotels and $4,925 for airline tickets. In addition to George's salary, he also earns commissions. His employer requires him to have an office in his home and has signed the form T2200 each year to this effect. During 2019, George purchased a new computer and software that will be used solely in his home office for employment-related uses. The computer cost $3,600 and the various software programs cost $1,250. 650 House Costs Area of home used for home office (square feet) Total area of home (square feet) Telephone line including high speed internet connection Hydro Insurance - House Maintenance and repairs Mortgage interest Mortgage life insurance premiums Property taxes 5,000 620 3,200 4,000 3,800 6,200 400 6,700 Tax Software Assignment Patient Am't (Y/M/D) 2019-12-31 2019-08-31 2019-09-19 2019-11-07 2019-06-07 2019-03-22 2019-12-20 2019-10-01 George George George Valerie Joan David Martin Medical Expenses Johnson Inc. Dr. Smith Optician Pharmacy Dr. Wong Tropical Disease Centre Dr. Walker Dr. Takarabe Description Out of Canada insurance Dental fees Prescription glasses Prescription Psychiatric counseling Prescription Group therapy Orthodontics and Dental 731.00 155.40 109.00 66.84 2,050.00 390.00 6,000.00 30,000.00 Kevin George paid $800 for the care and feeding of Kevin's seeing eye dog, Isis, during 2019. At the beginning of 2019, George had a net capital loss carry forward of $10,500 from the sale of shares in 2018. He had not disposed of any capital assets prior to 2018. Asset 1 Asset 2 Asset 3 Sailboat N/A Asset Dispositions Description Number of units Year of acquisition Date of disposition Proceeds of disposition Adjusted cost base Outlays and expenses Molson Inc. shares 150 2016 February 14 37,000 27,600 35 Imperial Oil shares 387 2017 June 6 9,600 12,100 29 2017 October 1 74,000 72,000 N/A Asset 5 Painting 2012 Asset Dispositions Description Year of acquisition Date of disposition Proceeds of disposition Adjusted cost base Outlays and expenses Asset 4 Motorcycle 2019 November 17 14,000 21,000 N/A Asset 6 Coin collection 2016 March 24 700 1,800 N/A August 28 1,100 450 N/A 572 Chapter 11 Tax Software Assignment Problems Amount Real Estate Rental - Commercial Property Address - 888 YYZ Drive, Toronto, Ontario MOM OMO Year of purchase Gross rents Property taxes Insurance Interest on mortgage Payment on principal Furnace repairs Maintenance contract Building purchased for $120,100 - UCC beginning of year Fixtures purchased for $8,500 - UCC beginning of year 2015 16,000 5,128 1,890 3,175 2,200 550 3,469 107,441 4,651 The building and fixtures were purchased on August 28, 2015. At the time the building and fix- tures were being used as a drugstore and Mr. Pharmacy has retained the same tenant. George knows he should have been contributing to various savings plans over the years, but his increasing number of needy dependants required he spend all of his take home pay to support them and he has contributed to none. It was only in 2019 that his compensation had increased enough so that he had sufficient funds to consider savings plans. His daughter had made contributions totaling more than $10,000 to an RESP for Kevin prior to her death, but George has made no RESP contributions to the plan since then. George's 2019 RRSP deduction limit is $285,550, Mr. Musician's mother, Eunice, was born on April 10, 1932, and his father, Earl, was born on November 16, 1930. They both live with Mr. Musician and his wife. While his father has some mobility issues, he is not infirm. His mother is legally blind. Eunice Musician had income of $9,500 for the year, while Earl Musician had income of $7,500. Other information concerning Mr. Musician and his family for 2019 is as follows: 1 Mr. Musician earned $16,500 for work as the house pianist at the Loose Moose Pub. His T4 showed that his employer withheld $500 for income taxes and $287.30 for El. No CPP was withheld as he has previously filed an election to stop contributing to the CPP. 2. During the year, Mr. Musician made his annual $3,000 donation to Planned Parenthood Of Canada, a registered Canadian charity. 3. Mr. Musician has been married before to Lori Musician (SIN 527-000-319). Lori is 52 years old and lives in Fort Erie, Ontario. 4. Mr. Musician has two additional children who live with their mother, Ms. Dolly Nurse (SIN 527-000-582), in Burnaby, British Columbia. The children are Megan Nurse, aged 12, and Andrew Nurse, aged 14. Neither child has any income during 2019. While Ms. Nurse and Mr. Musician were never married, Mr. Musician acknowledges that he is the father of both children. Although Buddy has provided limited financial aid by paying their dental and medi- cal expenses, the children are not dependent on Buddy for support. 5. Mr. Musician wishes to claim all his medical expenses on a calendar year basis. On Decem- ber 2, 2019, Mr. Musician paid dental expenses to Canada Wide Dental Clinics for the fol- lowing individuals: Himself $1,200 Natasha (wife) 700 Richard (adopted son) 800 Sarah (adopted daughter) 300 Linda (daughter) 100 Earl (father) 1,050 Lori (ex-wife) 300 Dolly Nurse (mother of two of his children) 675 Megan Nurse (daughter of Dolly Nurse) 550 Total $5,675 6. M. Musician signed a contract with Fred Nesbitt on January 13, 2019, to do permanent modifications to his house. The contract was for the installation of ramps with sturdy hand railings outside his front and back doors to give his parents easier access to the house and modifications to their bathroom so they would be less likely to fall when using the shower. The contract price was $5,800. As neither of his parents has a severe and prolonged mobil- ity impairment, these expenditures are not eligible medical expenses. 7. Mr. Musician paid four quarterly instalments of $1,000 each (total of $4,000) for 2019, as requested on his Instalment Reminders from the CRA. He paid each instalment on the due date, 8. Mr. Musician receives $7,271.67 in Old Age Security payments and $5,500 in Canada Pen- sion Plan "retirement benefit" payments over 12 months. There was no tax shown as with- held on his TAA(OAS) or his T4A(P). 9. Mr. Musician builds a state-of-the-art home theatre in a new extension of his home. In order to finance it, he sells stock in his RRSP and withdraws the funds from his RRSP His T4RSP showed $52,000 in withdrawals from the House of Rock Bank (Box 22) and total tax of $15,600 deducted from these payments. 10. Several of Mr. Musician's songs, including his outstanding hit "Drop Kick Me Jesus Through The Goal Posts Of Life have provided him with substantial royalty payments over the years. Tax Software Assignment Problems In 2019, the Never Say Die Record Company paid him $78,000 in royalty payments. Nota was issued by the company. 11. Worder to ensure the financial security of his family, Mr. Musician decided to return to song writing in earnest. On November 1, 2019, he rented a small, quiet studio for $700 a month and purchased a Roland electric piano for $7,750 that was delivered there. He does not plan to use the space or piano for personal enjoyment, only for composing. 12. The previous year, on January 2, 2018, Mr. Musician elected not to make any further CPP contributions on his self-employed income. 13. Mr. Musician is required by a court order to pay spousal support of $400 per month to his former spouse, Lori Musician. Mr. Musician made spousal support payments of $4.800 dur ing 2019. 14. Mr. Musician is required by a court order to make child support payments of $350 per month to Dolly Nurse for his two children, Megan and Andrew Nurse. A total of $4 200 was ao during the year. 15. Mr. Musician made contributions to the federal Liberal Party in the amount of $610 during the year. 16. Mr. Musician made a $5,000 contribution to his TFSA during the year. Thanks to the exce ent investing advice of his gardener, the balance in his TFSA account has grown to more than $175,000 by the end of the year. Required: With the objective of minimizing Mr. Musician's Tax Payable, prepare Mr. Musicians 2019 income tax return using the Profile tax software program assuming Natasha does not file a tax return. List any assumptions you have made and any notes and tax planning issues you feel should be placed in the file. Tax Software Assignment Problem Eleve This problem is an expansion of the Chapter 4 problem. DISCLAIMER: All characters appearing in this problem are fictitious. Any resemblance to real persons, living or dead, is purely coincidental. the last few years. Unfortunately, his family life has not been very happy. Three years ago, his only chile, Anna, was driving a car that was hit by a drunk driver. She and her husband were killed and their 14 year old son, Kevin , was blinded in the accident. He also suffered extensive injuries to his jaw that have required major and prolonged dental work. George and his wife, Valerie, adopted Kevin. Valerie quit her part time job to care for him. She also cares for her mother, Joan Drugstore, who lives with them. Joan suffers from dementia, Par kinson's, and severe depression. The family doctor has signed a letter stating that she is dependent on George and Valerie because of her impairments. Joan does not meet the residency require- ments necessary to qualify for Canadian Old Age Security payments. Valerie's parents separated two years ago in Scotland after her father, David Drugstore, suffered enormous losses in the stock market. They were forced to sell their home and David moved to Chile. David phones periodically to request that money be deposited in his online bank account. George's brother, Martin, completed an alcohol rehabilitation program after being fired for drink- ing on the job. He is also living with George and Valerie while he is enrolled as a full time student at Western University. George is paying his tuition and Martin has agreed to transfer any avail- able education related amounts to George. Although Martin plans to file his 2019 tax return, he has not done so yet. Tax Software ASSIS 1 Kevin is taking several undergraduate psychology courses at Western University. After hearing a talk given by an expert blind echolocator (one who uses sound to locate objects), his goal is to become a researcher at the Brain and Mind Institute and study the use of echolocation. Other information concerning George for 2019 is given on the following pages. Required: Prepare the 2019 income tax return of George Pharmacy using the Profile tax soft ware program assuming Valerie does not file a tax return List any assumptions you have made and any notes and tax planning issues you feel should be placed in the file. Ignore HST implica- tions in your solution by assuming that George does not qualify for the GST/HST rebate. Personal Information Title First Name Last Name SIN Date of birth (Y/M/D) Marital Status Canadian citizen? Provide information to Elections Canada? Own foreign property of more than $100,000 Canadian? Taxpayer Mr. George Pharmacy 527-000-509 1955-07-02 Married Yes Yes No Taxpayer's Address 123 ZZZ Street, London, Ontario NOZ OZO Phone number (519) 111-1111 Child Mother-In-Law Spouse Family Members First Name Last Name SIN Date of birth (Y/M/D) Net income Valerie Pharmacy 527-000-483 1954-12-30 $6,520 in CPP Kevin Pharmacy 527-000-517 2003-10-17 Nil Joan Drugstore None 1934-02-24 $500 Father-In-Law Brother Family Members First Name Last Name SIN Date of birth (Y/M/D) Net income David Drugstore None 1935-01-12 Nil Martin Pharmacy 527-000-533 1972-06-02 $8,300 During September, David was arrested in Chile. Valerie had to spend three weeks in Chile and pay $2,000 in bribes before she could get him released from jail. George had to pay Nannies On Call $3,500 for in-home help to take care of Kevin while she was gone. 70 Chapter 11 Tax Software Assignment Problems Box Amount 8,000 A B T2202A - (Martin) Tuition fees - for Martin Pharmacy (brother) Number of months in school - part time Number of months in school - full time 0 8 Box Amount A 3,600 B 8 T2202A - (Kevin) Tuition fees - for Kevin Number of months in school - part time Number of months in school - full time 0 Am't Donor Charitable Donation Receipts Mothers Against Drunk Drivers (MADD) Canadian Institute For The Blind (CNIB) 1,000 3,000 Valerie George Box Amount T4 14 16 18 Issuer - Mega Pharma Inc. Employment income Employee's CPP contributions Employee's El premiums Income tax deducted Employment commissions Charitable donations 378,000.00 2,748.90 860.22 114,000.00 82,000.00 400.00 22 42 46 During 2019, Mega reimbursed George $3,788 for meals and entertainment with clients, $2,268 for hotels and $4,925 for airline tickets. In addition to George's salary, he also earns commissions. His employer requires him to have an office in his home and has signed the form T2200 each year to this effect. During 2019, George purchased a new computer and software that will be used solely in his home office for employment-related uses. The computer cost $3,600 and the various software programs cost $1,250. 650 House Costs Area of home used for home office (square feet) Total area of home (square feet) Telephone line including high speed internet connection Hydro Insurance - House Maintenance and repairs Mortgage interest Mortgage life insurance premiums Property taxes 5,000 620 3,200 4,000 3,800 6,200 400 6,700 Tax Software Assignment Patient Am't (Y/M/D) 2019-12-31 2019-08-31 2019-09-19 2019-11-07 2019-06-07 2019-03-22 2019-12-20 2019-10-01 George George George Valerie Joan David Martin Medical Expenses Johnson Inc. Dr. Smith Optician Pharmacy Dr. Wong Tropical Disease Centre Dr. Walker Dr. Takarabe Description Out of Canada insurance Dental fees Prescription glasses Prescription Psychiatric counseling Prescription Group therapy Orthodontics and Dental 731.00 155.40 109.00 66.84 2,050.00 390.00 6,000.00 30,000.00 Kevin George paid $800 for the care and feeding of Kevin's seeing eye dog, Isis, during 2019. At the beginning of 2019, George had a net capital loss carry forward of $10,500 from the sale of shares in 2018. He had not disposed of any capital assets prior to 2018. Asset 1 Asset 2 Asset 3 Sailboat N/A Asset Dispositions Description Number of units Year of acquisition Date of disposition Proceeds of disposition Adjusted cost base Outlays and expenses Molson Inc. shares 150 2016 February 14 37,000 27,600 35 Imperial Oil shares 387 2017 June 6 9,600 12,100 29 2017 October 1 74,000 72,000 N/A Asset 5 Painting 2012 Asset Dispositions Description Year of acquisition Date of disposition Proceeds of disposition Adjusted cost base Outlays and expenses Asset 4 Motorcycle 2019 November 17 14,000 21,000 N/A Asset 6 Coin collection 2016 March 24 700 1,800 N/A August 28 1,100 450 N/A 572 Chapter 11 Tax Software Assignment Problems Amount Real Estate Rental - Commercial Property Address - 888 YYZ Drive, Toronto, Ontario MOM OMO Year of purchase Gross rents Property taxes Insurance Interest on mortgage Payment on principal Furnace repairs Maintenance contract Building purchased for $120,100 - UCC beginning of year Fixtures purchased for $8,500 - UCC beginning of year 2015 16,000 5,128 1,890 3,175 2,200 550 3,469 107,441 4,651 The building and fixtures were purchased on August 28, 2015. At the time the building and fix- tures were being used as a drugstore and Mr. Pharmacy has retained the same tenant. George knows he should have been contributing to various savings plans over the years, but his increasing number of needy dependants required he spend all of his take home pay to support them and he has contributed to none. It was only in 2019 that his compensation had increased enough so that he had sufficient funds to consider savings plans. His daughter had made contributions totaling more than $10,000 to an RESP for Kevin prior to her death, but George has made no RESP contributions to the plan since then. George's 2019 RRSP deduction limit is $285,550