Mrs Jane Smith has provided you with the following information with respect to her 2018 taxation year She has asked you to review the information and provide her with an approximation of her taxes payable for 2018 taking into consideration all the provisions available to her pursuant to the Income Tax Act Salary, net $160,000 Income taxes withheld $40,000 CPP 3,000 EI 1,000 44,000 $204,000 Mrs Smith paid professional fees of $1,250 to the Professional Engineers of Ontario Five years ago, Mrs Smith invested in ABC Inc , a Canadian private company which is a small business corporation She invested in ABC Inc by way of a $100,000 unsecured loan bearing interest at 5 per year, and the purchase of common shares in the amount of $50,000 Until December 2017 she received interest payments on the loan However, for 2018 she has not received any interest payments and in fact ABC Inc has filed for bankruptcy No dividends were ever declared on her common share holdings Mrs Smiths earned income for 2017 for RRSP purposes is $210,000 In November of 2018, Mrs Smiths employer relocated her from Toronto to Windsor to head up a new manufacturing facility In her relocation, Mrs Smith incurred and paid for $28,500 of eligible moving expenses Mrs Smiths employment income from the new work location was $15,000 for 2018 She received a moving expense allowance of $10,000 Mrs Smith is recently divorced She pays estimated alimony of $3,000 per month The lawyers have yet to finalize the divorce Mrs Smith was in a serious car accident in 2015, and as a result she requires the use of a wheelchair In 2015 she filed the necessary form to qualify for the disability tax credit and was approved for 2015 and future years In 2018, Mrs Smith sold the following assets Also, Mrs Smith has unclaimed capital losses on listed personal property of $1,400 arising in 2017 Oil Painting (cost $1,200 proceeds $750 LPP) Canoe (cost $1,750 proceeds $1,500 PUP) Rare Coin (cost $1000 proceeds $1,900 LPP) Bible produced in 1635 (cost $2,500 proceeds $18,500 LPP) Antique car (cost $10,000 proceeds $11,000 PUP) Antique chair (cost $800 proceeds $1,100 PUP) Antique table (cost $200 proceeds $3,000 PUP) Mrs Smith received a $4 million settlement as a result of the car accident In 2017 she invested these funds and earned interest income of $100,000 that was reported on her 2017 tax return This did not make her happy as she paid almost $40,000 in taxes as a result In April 2018 she (on the advice of a friend) transferred $1 million to a savings account in the name of her 16 year old daughter Jennifer and $1 million to a savings account in the name of her 19 year old daughter Kate For 2018, the savings account in Jennifers name earned $23,000 and the savings account in Kates name earned $29,200 In 2018, Mrs Smith sold her residences The following information relates to the disposition of the residences Mrs Smith has never used the principal residency exemption Toronto Home (cost $100,000 selling price $480,000 year of purchase 2009) Farm in Quebec (cost $170,000 selling price $268,000 year of purchase 2011) Florida Condo (cost $140,000 selling price $190,000 year of purchase 2014) In 2018, Mrs Smith sold 2000 shares of Shy High Limited for $60 per share, a Canadian public corporation The following are the details of these shares Nov 8, 2009 purchased 500 shares at $21 per share April 15, 2010 purchased 600 shares at $19 per share July 2, 2011 purchased 1200 shares at $23 per share June 30, 2013 sold 800 shares at $29 per share Oct 23, 2014 received a stock dividend of 10 of shares held stock dividend increased corporations paid up capital by $1 per share Mrs Smith contributed $18,000 to RRSPs for 2018 Mrs Smith incurred $11,000 of eligible medical expenses for 2018 Mrs Smith is also a landlord She owns owned several rental properties The following information relates to each rental property Property A Rental Income $75,000 interest expenses $48,000 property taxes $7,000 CCA $8,200 Property B Sold January 1, 2018 for total proceeds of $700,000 Consideration of the purchase price was $100,000 cash paid on January 1, 2018 and a $600,000 note at 10 On December 31, 2018, Mrs Smith received $60,000 on account of interest on the note The following information relates to the allocation of the purchase price as well as the tax attributes of the land and building Land (cost $50,000 proceeds $300,000) Building (cost $300,000 UCC $243,000 proceeds $400,000) Property C Sold January 1, 2018 for $450,000 The allocation of the purchase price was $300,000 for the building and $150,000 for the land At December 31, 2017 the building had a cost of $400,000 and UCC of $350,000, and the land had a cost of $100,000 The building was the last remaining asset in the class Property D A commercial rental property whereby the tenants carried on active business income In February of 2018, Mrs Smith decided to sell the property for $2,320,000 of which $2,000,000 was allocated to the building and $320,000 was allocated to the land The building had a cost of $800,000 and a UCC of $262,000 The land had a cost of $80,000 However, on January 1, 2019 Mrs Smith used the proceeds to purchase another commercial property The purchased price of the new property was $2,900,000 ($2,400,000 for building $500,000 for land) Mrs Smith has a rather active investment portfolio in the stock market A summary of her investment returns are as follows Interest on bonds $45,500 Capital Gains $95,600 Mrs Smith has unused net capital losses of $41,400 Mrs Smith made charitable contributions in 2018 of $10,230 The RRSP limit for 2018 is $25,400

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jul 06, 2024

Mrs. Jane Smith has provided you with the following information with respect to her 2018 taxation year. She has asked you to review the information

Mrs. Jane Smith has provided you with the following information with respect to her 2018 taxation year. She has asked you to review the information and provide her with an approximation of her taxes payable for 2018 taking into consideration all the provisions available to her pursuant to the Income Tax Act.

Salary, net $160,000

Income taxes withheld $40,000

CPP 3,000

EI 1,000 44,000

$204,000

Mrs. Smith paid professional fees of $1,250 to the Professional Engineers of Ontario.
Five years ago, Mrs. Smith invested in ABC Inc., a Canadian private company which is a small business corporation. She invested in ABC Inc. by way of a $100,000 unsecured loan bearing interest at 5% per year, and the purchase of common shares in the amount of $50,000. Until December 2017 she received interest payments on the loan. However, for 2018 she has not received any interest payments and in fact ABC Inc. has filed for bankruptcy. No dividends were ever declared on her common share holdings.
Mrs. Smiths earned income for 2017 for RRSP purposes is $210,000.
In November of 2018, Mrs. Smiths employer relocated her from Toronto to Windsor to head up a new manufacturing facility. In her relocation, Mrs. Smith incurred and paid for $28,500 of eligible moving expenses. Mrs. Smiths employment income from the new work location was $15,000 for 2018. She received a moving expense allowance of $10,000.
Mrs. Smith is recently divorced. She pays estimated alimony of $3,000 per month. The lawyers have yet to finalize the divorce.
Mrs. Smith was in a serious car accident in 2015, and as a result she requires the use of a wheelchair. In 2015 she filed the necessary form to qualify for the disability tax credit and was approved for 2015 and future years.
In 2018, Mrs. Smith sold the following assets. Also, Mrs. Smith has unclaimed capital losses on listed personal property of $1,400 arising in 2017.

Oil Painting (cost - $1,200; proceeds - $750; LPP)

Canoe (cost - $1,750; proceeds - $1,500; PUP)

Rare Coin (cost - $1000; proceeds - $1,900; LPP)

Bible produced in 1635 (cost - $2,500; proceeds - $18,500; LPP)

Antique car (cost - $10,000; proceeds - $11,000; PUP)

Antique chair (cost - $800; proceeds - $1,100; PUP)

Antique table (cost - $200; proceeds - $3,000; PUP)

Mrs. Smith received a $4 million settlement as a result of the car accident. In 2017 she invested these funds and earned interest income of $100,000 that was reported on her 2017 tax return. This did not make her happy as she paid almost $40,000 in taxes as a result. In April 2018 she (on the advice of a friend) transferred $1 million to a savings account in the name of her 16 year old daughter Jennifer and $1 million to a savings account in the name of her 19 year old daughter Kate. For 2018, the savings account in Jennifers name earned $23,000 and the savings account in Kates name earned $29,200.

In 2018, Mrs. Smith sold her residences. The following information relates to the disposition of the residences. Mrs. Smith has never used the principal residency exemption.

Toronto Home (cost - $100,000; selling price - $480,000; year of purchase 2009)

Farm in Quebec (cost - $170,000; selling price - $268,000; year of purchase 2011)

Florida Condo (cost $140,000; selling price - $190,000; year of purchase 2014)

In 2018, Mrs. Smith sold 2000 shares of Shy High Limited for $60 per share, a Canadian public corporation. The following are the details of these shares:

Nov 8, 2009 purchased 500 shares at $21 per share

April 15, 2010 purchased 600 shares at $19 per share

July 2, 2011 purchased 1200 shares at $23 per share

June 30, 2013 sold 800 shares at $29 per share

Oct 23, 2014 received a stock dividend of 10% of shares held; stock dividend increased corporations paid up capital by $1 per share.

Mrs. Smith contributed $18,000 to RRSPs for 2018.
Mrs. Smith incurred $11,000 of eligible medical expenses for 2018.
Mrs. Smith is also a landlord. She owns/owned several rental properties. The following information relates to each rental property:

Property A - Rental Income - $75,000; interest expenses $48,000; property taxes - $7,000; CCA - $8,200.

Property B - Sold January 1, 2018 for total proceeds of $700,000. Consideration of the purchase price was $100,000 cash paid on January 1, 2018 and a $600,000 note at 10%. On December 31, 2018, Mrs. Smith received $60,000 on account of interest on the note. The following information relates to the allocation of the purchase price as well as the tax attributes of the land and building.

Land (cost - $50,000; proceeds - $300,000)

Building (cost - $300,000; UCC - $243,000; proceeds - $400,000)

Property C Sold January 1, 2018 for $450,000. The allocation of the purchase price was $300,000 for the building and $150,000 for the land. At December 31, 2017 the building had a cost of $400,000 and UCC of $350,000, and the land had a cost of $100,000. The building was the last remaining asset in the class.

Property D A commercial rental property whereby the tenants carried on active business income. In February of 2018, Mrs. Smith decided to sell the property for $2,320,000 of which $2,000,000 was allocated to the building and $320,000 was allocated to the land. The building had a cost of $800,000 and a UCC of $262,000. The land had a cost of $80,000. However, on January 1, 2019 Mrs. Smith used the proceeds to purchase another commercial property. The purchased price of the new property was $2,900,000 ($2,400,000 for building; $500,000 for land).