Mr. Paul River is a professional accountant (CPA-CGA) who began working as an administrator for ABC Company, a large public company, in 2017 at a remote location in the province of Manitoba. During 2018, Mr. River was transferred to a new office located in Halifax, NS as part of a career advancement plan. His gross salary for the year 2018 was $100,000. The following amounts were withheld from his gross salary in 2018: $25,000 858 Federal Income Tax Employment Insurance Premiums Canada Pension Plan Contributions Registered Pension Plan Contributions Charitable contributions (Centraide) Professional Dues - CPA/CGA 2,594 10,000 1,000 1,200 Other Information: 1. Mr. River is a member of his employer's money purchase (defined contribution) Registered Pension Plan ("RPP"). For 2018, his employer made a $5,000 match ing contribution to the RPP on his behalf. 2. During 2018, Mr. River was provided with an automobile that was acquired by the Company at a cost of $150,000 including all taxes. Total operating costs were $0.50 per km (or $25,000) for the year, all paid by the Company. The car was available to Mr. River the entire year except that during a 3-month period while he was in hospital as a result of a sky-diving accident he decided it was safer to leave the car at the company's office instead of leaving it unattended at home. He drove the car a total of 50,000 kms during the year, of which 10,000 kms were personal. He reimbursed the Company $0.10 per km (or $1,000) for his personal use of the car. 3. On February 1, 2018, Mr. River won $50,000 at the lottery and decided to contribute half ($25,000) to his RRSP account. Mr. River wants to take the maximum deduction possible in 2018 for this RRSP contribution. Upon review of his tax records, you identified that at the end of 2017 Mr. River had $16,000 of Unused RRSP Deduction Room available for carryover to 2018, and no undeducted RRSP contributions at that time. Mr. River's Earned Income for 2017 was $100,000 and his pension adjustment for 2017 was $15,000 4. Mr. River has for many years owned shares in Flimsy Motors Company ("FMC"), which are traded on the TSX. On July 31, 2018, FMC paid an eligible dividend of $3.025 per share to Mr. River on all shares owned as of July 30, 2018. Below is a history of all his purchases and sales of shares in FMC up until January 1, 2018 2,000 shares @ $24 per share 5,000 shares @ $10 per share 1,000 shares @$30 per share 3,000 shares @ $35 per share 1,000 shares @ $45 per share Purchase, June 2008 Purchase, March 2009 Sale, December 2014 Purchase, March 2015 Sale, December 2017 5. On December 1, 2018, Mr. River decided to sell 4,000 shares he held in FMC at $55 per share. He paid a 1% commission on this sale to his broker ($0.55/share). 6. During 2018 Mr. River accepted a new position in Halifax, NS and was required to move to a new home that was 250km closer to his new work place. Moving costs were $50,000 in total and were all paid by his employer. The old residence was sold quickly but resulted in a loss of $25,000. To compensate Mr. River for the sudden move, his employer accepted to reimburse him the entire loss. The Company paid $25,000 to Mr. River on December 1, 2018. 7. As a result of the move, Mr. River got rid of a number of personal assets he had stored for years at his old residence. The relevant information for the assets sold in 2018 is the following: Selling Expenses $0 $0 $500 $500 $500 Proceeds $1,500 $950 $13,000 $11,000 $17,000 Cost $2,000 $850 $20,000 $7,000 $8,000 Home furniture Garden tools Coin Collection Sculpture Antique Clock 8. Mr. River is a 50% owner in a business that imports clothing accessories from Asia and resells them at a high mark-up. During 2018, the business lost a whole container of imported products in a high-sea accident for which no insurance was purchased. For the fiscal period ended December 31, 2018, the business suffered an extraordinary loss for tax purposes of $150,000, 50% of which was allocated to Mr. River. 9. Mr. River (43 years old) has been living with Barbara (48 years old) for over 3 years now and her 20-year old son John. Barbara has Net Income of $50,000 for 2018. 10. The entire family is healthy except for John who is legally blind since birth. John is a full time university student for 8 months of the year and doesn't work but received social assistance payments of $11,800 in 2018 from the provincial government. Mr. River paid for John's tuition of $8,000 for 2018 and, in return, John agreed to transfer him the maximum tax credit possible. 11.Mr. River paid for the following medical expenses in 2018: Prescriptions drugs for Mr. River Medical specialists for John Prescription glasses for Barbara Liposuction for Mr. River Dentist for John Dentist for Barbara $3,465 10,490 875 2,463 3,300 1,325 Required: A. Calculate the maximum RRSP deduction Mr. River can take for 2018 and determine whether the RRSP contributions made during 2018 result in any penalties. (10 marks) B. Calculate Mr. River minimum Net Income and for tax purposes using the ITA 3 rules and format for the year 2018, as well as his Taxable Income for the year. (50 marks) C. Calculate Mr. River' minimum Net Federal Tax Payable (or refund) for the year 2018. Ignore any provincial tax and provincial credits. (20 marks) In all cases, explain your answer, including detailed calculations, and provide reasons for omitting any item mentioned in the question that you have not included in your calculations. Ignore all GST/HST considerations. Assume all applicable elections were made and applicable forms and certificates are filed with CRA. You can use the following tax rates for 2018 to calculate federal tax payable: Marginal Rate On Excess 15% 20.5% 26.0% 29.0% 33.0% Taxable Income In Excess Of $ -0- $46,605 $93,208 $144,489 $205,842 Federal Part I Tax $-0 $6,991 $16,544 $29,877 $47,670