Need Property Income.Thanks.

Kyle is 38 years old and is married Kelsey who is also 38. They have three children Oskar who turned 6 in 2020; Mia who turned 15 and Gracle who turned 18 during the year. Mia has severe hearing loss and the Canada Revenue Agency has approved her for disability status. Gracie, who turned 18 is very responsible and worked three jobs in 2020 (even amid Covid!) to save money for her education. Her total employment income for 2020 was $13,500.2020 was a big year for Gracie as she started University. More details on that later! Up until the move to St. John's, Kelsey was a stay at home Mom, however when the family arrived in St. John's Kelsey was hired on a part time basis as a photographer. In 2020 she received a gross salary of $23,500 and paid $250 of union dues. She had $1,015 of CPP deductions; El of $450 and tax of $2,600 withheld from her salary. She also received $1,800 of interest income from a GIC she purchased three years ago that pays interest annually. So now that you have met the family, let's find out about Kyle. It's.. Property Income During the year, one of the Canadian public corporations of which Kyle is a shareholder issued him 100 additional shares as a stock dividend. The shares had a stated value of $40 per share. Kyle placed the shares in his safety deposit box along with his other securities. Also on July 1, 2018, Kyle purchased a four-year guaranteed investment certificate for $30,000 that bears interest at 10%. The interest compounds annually but is not payable until the end of the four- year term. Kyle did not include any amount of interest in his previous year's income. On January 2, 2020, Kyle sold a warehouse property that was located in Montreal for $180,000 (land $15,000, building $165,000). The building was used by Abstract Limited (Kyle's former employer in Montreal) to store inventory for resale. The company paid Kyle fair value rents for the building. Kyle ended the rental contract on December 31, 2019 so there was no rental income or expenses for 2020. The property was originally purchased at a cost of $140,000 (land $10,000, building $130,000). At the end of 2019 the building had an undepreciated capital cost of $110,000 Kyle received dividends from Atlantic Oil Limited in 2020 in the amount of $750. Kyle also owned shares of Nala Inc., which was a Canadian controlled private corporation and received non-eligible dividends in 2020 of $1,500. Page 7 Kyle's sister Felicia had needed money a few years ago and Kyle lent her $10,000 to invest in a business venture that has not proven to be very successful. She pays Kyle 4% interest per year and Kyle received his annual interest payment on December 21. Kyle also received interest of $850 from Canada Savings Bonds and $250 on his savings account at CIBC. He paid $100 to CIBC for his safety deposit box. Kyle received a dividend from Disney Corporation. Kyle received a cheque for $1,800 US which was net of a 10% withholding tax. On the day that Kyle received the dividend; $1 US was equal to $.98 Canadian. Kyle paid $250 Canadian on a bank loan from CIBC that he had for this investment. After winning $500,000 on the slot machine at the Bellagio Hotel in Las Vegas during a vacation in May 2019, Kyle decided to invest some of his newly acquired funds in real estate and mortgage some of the purchases as well. In 2019, he purchased the following properties: Property 23 Kensington Place 91 Opran Place 39 Reid Street 49 Bugler Avenue Land $10,000 12,000 20,000 30,000 Building $ 40,000 45,000 80,000 100,000 Total $ 50,000 57,000 100,000 130,000 Each of the properties is a single unit family home. Not all of the units were fully rented during 2019_and Kyle determined that his net rental position (before capital cost allowance) for each of the properties was as follows for 2019 23 91 Kensington Opran Place Place $4,000 $5,000 (6,000) (3.000) Property Rent revenue uansa 39 Reid Street $7,000 (6.000) 49 Bugler Avenue $12,000 19.000) 2.000 Total $28,000 (24.000) $ 4,000 49 bugel Avenue 30,000 100,000 130,000 Each of the properties is a single unit family home. Not all of the units were fully rented during 2019 and Kyle determined that his net rental position (before capital cost allowance) for each of the properties was as follows for 2019: Property Rent revenue Expenses* Income (loss) 23 91 Kensington Opran Place Place $4,000 $5,000 (6.000) (3.000) ($2.000) $2.000 39 Reid Street $7,000 (6.000) $1,000 49 Bugler Avenue $12,000 (9.000) $ 3.000 Total $28,000 (24,000) $ 4.000 * Property taxes, insurance, interest, maintenance. In 2019 when determining the classes to apply the available CCA, Kyle decided that CCA should be applied in the following order to the maximum allowed: 1. Kensington Place 2. Opran Place 3. Reid Street 4. Bugler Avenue In 2020, (the current year) one of Kyle's close friends ran into financial difficulty, and he was forced to sell two of the properties to provide financial assistance. He sold 23 Kensington Place for $52,000 (land $12,000, building $40,000) and 39 Reid Street for $110,000 (land $24,000, building $86,000). In 2020, the four properties (including the two sold properties to the Page 8 In 2020, (the current year) one of Kyle's close friends ran into financial difficulty, and he was forced to sell two of the properties to provide financial assistance. He sold 23 Kensington Place for $52,000 (land $12,000, building $40,000) and 39 Reld Street for $110,000 (land $24,000, building $86,000). In 2020, the four properties (including the two sold properties to the Page 8 date of sale) had the following receipts and disbursements. 23 91 Kensington Opran Place Place $4,000 $15,000 Property Rent revenue 39 Reid Street $7,000 49 Bugler Avenue $12,000 1,200 8,000 700 4,250 3,800 3,900 Interest expense Payments on principal Property tax Advertising Insurance Utilities Repairs and maintenance Cost to erect a garage 500 2,000 1,200 200 500 700 900 0 0 2,500 50 500 1,200 1,000 900 2,200 2,800 1,000 3,700 950 5,000 Kyle has decided that he wants to claim the maximum CCA available in 2020 and he wishes to take the maximum first from Opran and then from Bugler. Employment Income Kyle Brown was employed by two employers in 2020. From January 1, 2020 to August 31", 2020 Kyle worked in Montreal as the Sales Manager for Abstract Limited, a Canadian controlled private corporation. His base salary while employed in Montreal was $175,000. As sales manager, he was entitled to a small commission on the sales made by staff under his supervision. He received $7,500 in such commissions in 2020, which included $1,000 of commissions earned in late 2020 that were not received until 2021. All of Kyle's expenses related to his commission income were reimbursed by his employer. This totaled $1,250. Abstract Limited deducted the following from his salary in: Canada Pension Plan contributions $2,898 Employment Insurance premiums 856 Income tax 35,000 Private medical plan premiums 300 Union dues 500 Contributions to a registered pension plan 3,500 Reimbursement of personal use of employer vehicle 200 In addition to the above, the employer paid the following to Kyle or on his behalt Travel allowance Group term life insurance premiums for $50,000 coverage Premiums for a private medical insurance plan Amounts to a deferred profit sharing plan Contributions to a registered pension plan Golf club membership dues to Beacon Golf Club to entertain potential clients $2.400 600 300 2,000 3.500 6,000 Kyle used Abstract's summer camp for a one-month holiday and paid the employer S200 rent in 2020 for its use. When not being used by employees, the summer camp is rented for the fair value amount of 5600 per month, Although Kyle owned his own automobile, he was also provided with a company car. The ca cost the company $35,000. During the eight months employed by Abstract Limited, he drove total of 24,000 km, of which 16,800 was for personal use. The employer also paid of the operating costs, which amounted to $3,000 for Kyle's period of employment During the year, Kyle attended a shipping conference in Toronto. His wife travelled with him at the company's expense (51,000). The employer also permitted staff to purchase merchandise from its retail outlet at the company's cost. During the year, Kyle purchased for $800 merchandise with a retail value of $1,200. Kyle also was awarded a gift for meeting his sales targets during the year. The corporation gave him a $400 gift certificate for Jack Astor's Restaurant. In addition Kyle was given a new briefcase that Abstract Limited purchased from Staples Office Depot for $325, as a birthday gift. In the summer of 2020, Kyle and his family decided to move to St. John's NL to pursue a new career with Avalon Oil Limited (AOL) - a new oil exploration company whose shares were traded on the Toronto stock exchange Kyle was offered and accepted the position of Vice President of Human Relations. Kyle and his family moved to St. John's NL on September 15, 2020. Kyle, his wife Kelsey and their three children Oskar, Gracie and Mia all flew from Montreal to St. John's. Expenses related to the move were as follows: House hunting trip in July 2020 - hotel and airfare $2,300 Airfare for the family in September 2020 3,850 Allied Moving Company - to move household effects 13,900 Hotel and meals in St. John's while waiting for their new house - 23 days at $200 per day 4,600 Legal cost related to the sale of their home in Montreal 3,000 Legal costs to purchase a home in St. John's, NL 2,500 Cleaning costs to clean the house in Montreal before the sale closed 300 AOL paid Kyle $5,000 to Kyle to assist covering the moving costs. Kyle was paid a gross salary of $20,000 per month for September to December indusive. Amounts withheld from his pay during this period included the following Canada Pension Plan contributions $2,898 Employment Insurance premiums 856 30,000 Income tax Contributions to a registered pension plan 8,000 2,000 Private medical plan premiums Kyle and Kelsey had a difficult time selling their home in Montreal. They had purchased the house in 2015 for $400,000. However, the market in downtown Montreal in the summer of 2020 was quite depressed because of Covid 19, and the sale only resulted in net proceeds of $360,000. Avalon Oil Limited agreed to reimburse Kyle for 50% of the housing loss and this was paid to him in November 2020. Because the housing market in St. John's was booming even in a pandemic, AOL agreed to provide Kyle with a housing loan to assist purchasing his home in St. John's. A $100,000 loan was given to Kyle on October 1, 2020. The loan was interest free. AOL could not afford to purchase a vehicle for Kyle, so instead provided him with a vehicle allowance of $500 per month for his four months employment with the company in 2020. This was unreasonably low but Kyle felt that he would be duly compensated for this when the company grew in the future. Kyle was also required by his contract of employment to pay for certain employment related costs as well. AOL signed a 12 200 for Kyle for the 2020 tax year. Kyle incurred the following costs: Meals and drinks for customer entertainment $ 1,600 Golf club dues used to entertain customers 1,100 Travel-airfares and hotel lodging 3.000 Purchase of a cell phone 800 Cell phone bill-pay-as-you-go plan (employment related) 1,200 Automobile expenses: Operating costs 3,800 Parking 100 Interest on car loan 2,200 Purchase of new automobile 37,000 Kyle drove 8,000 kilometers from September 1, 2020 to December 31, 2020 and of this total, 4,800 kilometers were for employment related activities On October 1, 2020, Kyle was granted a stock option that was exercisable immediately and expired in 2023. Kyle could purchase 5,000 shares at an option price of $12.50 per share. At the date the option was granted, the shares of ADL were trading for $10.00 per share. On November 1, 2020 the price of the shares had risen to $14 per share as a result of a new oil find in Central Newfoundland, and Kyle decided to exercise his option to buy 5000 shares. To assist Kyle with the cash necessary to buy the shares, AOL, also gave Kyle a loan for $50,000. The loan was interest free and repayable on December 1, 2023. in 2020, Gracle was accepted to McGill University's Degree program in Opera Performance Kyle knew the tuition at McGill was higher in comparison to MUN, and while the first term costs were manageable from a cash flow basis, he was worried about the winter term of 2021. so in December to ensure cash flow to assist Gracle with her education, he sold 2,000 shares of AOL at a price of $18.25 per share. Pages Self-Employment Income Kyle is a self-proclaimed workaholic, and in addition to his employment, he also runsa successful business as a proprietor. He discovered that there was a great market for fixing screens on IPAD, I phones and really any other device that has a cracked screen as a result of a dropped device. He has been working on this business for the last five years and business actually didn't suffer on the move from Montreal to St. John's as it appears that there are a great number of phones that also meet pavement in St. John's as well The Income statement for 2020showed the following: Sales $1,300,000 Cost of sales 780,000 Gross profit 520,000 Administrative and selling expenses 451.000 69,000 Other income (expenses) 51.000 Net income before tax $ 120,000 Some additional information follows: 1. Administrative and selling expenses include the following $ 3,000 (a) Donations to registered charities (b) Amortization/depreciation of tangible assets 12.000 Note 1: At the end of the previous year (2019), the undepreciated capital cost of certain asset classes was as follows: Class 1 Class 8 Class 10 $80,000 92.000 50,000 Note 2: During the current year, the company sold its fand and building for $150,000 (and $40,000, building $110,000) and moved into leased premises. The original cost of the property was $130,000 and $30,000, building $100,000). The building had an accounting book value of $70,000 at the time of sale Note: The Company owns several pieces of equipment. During the year, one unit that originally cost $10,000 and had a book value of $6,000 was sold for 58,000 Pape 6 (c) Legal fees: Settling a dispute relating to the purchase of defective merchandise 4,000 Reorganizing the corporation's share capital 8,000 (d) Amortization 9,000 Note: The current year's amortization expense applies to a number of intangible assets. During the previous year (2019), the company took over a competitor and purchased goodwill for $40,000 and a franchise (unlimited life) for $10,000. (Hint You have to calculate the opening UCC for 2020) . During the current year, the franchise was sold for $8,000 when its book value for accounting purposes was $9,000. In addition, the company purchased an existing patent from a competitor for $20,000. The patent with a remaining legal life of 10 years was purchased on the first day of the current year. 2 Other income (expenses) includes the following: Gain on sale of land $10,000 Gain on sale of building 40,000 Gain on sale of equipment 2,000 Loss on sale of franchise (1,000 $51.000 Property Income During the year, one of the Canadian public corporations of which Kyle is a shareholder issued him 100 additional shares as a stock dividend. The shares had a stated value of $40 per share Kyle placed the shares in his safety deposit box along with his other securities. Also on July 1, 2018, Kyle purchased a four-year guaranteed investment certificate for $30,000 that bears interest at 10%. The interest compounds annually but is not payable until the end of the four year term. Kyle did not include any amount of interest in his previous year's income On January 2, 2020, Kyle sold a warehouse property that was located in Montreal for $180,000 (land $15,000, building $165,000). The building was used by Abstract Limited (Kyle's former employer in Montreal) to store inventory for resale. The company paid Kyle fair valuerents for the building. Kyle ended the rental contract on December 31, 2019 so there was no rental income or expenses for 2020. The property was originally purchased at a cost of $140,000 (land $10,000, building $130,000). At the end of 2019 the building had an undepreciated capital cost of $110,000 i rece dividends from Atlantico Limited in 2020s the amount of $750 viehe Cost to erect a garage 5,000 Kyle has decided that he wants to claim the maximum CCA available in 2020 and he wishes to take the maximum first from Opran and then from Bugler. Other Capital Dispositions I addition to other dispositions mentioned in previous sections, Kyle has also disposed of other capital items in 2020. He brings to your attention the following: Kyle sold the following items during 2020: 2010 Vehicle Antique cabinet A rare coin Shares in a public corporation Canoe Limited edition painting Sculpture Original Cost $24,000 1,000 100 4,000 500 800 1,100 Proceeds $10,000 2,000 1,100 3,000 600 2,500 900 Kyle had been purchasing some shares in a Canadian Junior mining company call Breex over the last three years as he felt the company was going to find a big mining site in Labrador and he was hoping for a big return. The shares were trading on the Toronto Stock exchange. His purchases were as follows: Page 9 10/11 500 Number of shares Date purchased Cost per share June 3, 2017 $5.00 August 31,2017 1,200 54.50 January 9, 2018 200 $5.75 May 18, 2019 600 $5.90 September 14, 2019 1,000 $6.10 On December 10, 2020 Kyle decided to sell half of his shares as the price of the shares had increased due to a mining site discovery. He sold half of his portfolio for $15.00 per share. Kyle also sold 500 shares of Brown Inc. which were qualifying small business corporation shares and hence eligible for the small business capital gains exemption. He had paid $1,000 for the shares and sold them for $250,000, Kyle has no cumulative net investment losses and has claimed $500,000 of his lifetime capital gains exemption in a prior year. Some additional tidbits Kyle was married when he was 20 years old and that marriage ended in divorce. There were no children but Kyle was ordered by the Family Court to pay his ex-wife alimony in the amount of $1,500 per month. He followed the court order and made the required payments in 2020. Kyle contributed $12,000 to his RRSP in 2020. His unused contribution room that was reported on his Notice of Assessment from 2019 was $10,000. He also contributed 55,000 to his tax-free savings account in 2020. This was the first time he has made any contribution Kyle and Kelsey paid $5,000 in 2020 for Oskar to attend daycare at Lakewood Daycare. They also paid $7,000 for an after school program for Mis Oskar also played soccer during the year and the cost of the program was 5600 for the entire year. As noted earlier, Gracle started at McGill full time in Fall 2020. Tuition fees paid were 56,000 and she attended 4 months full time in 2020. Kyle also spent $4,000 on residence fees for Gracle to live on campus. Gracie moved to Montreal in the fall of 2020, as McGill did require performance students to be in Montreal for lessons. They also provided her with $4,800 of pocket money during this period. Gracle has agreed that if there are any tax credits available that can be transferred to Kyle or Kelsey, then she wished the transfer to occur In addition to the private health services plan premiums that Kyle had withheld from his pray for the family plan, the following medical expenses were paid in 2020 that were not covered by any Insurance plan 11 / 11 Oskar Kyle $300 100 Gracie $100 Mia $200 $200 Kelsey $300 100 400 Dental Optometrist Contact lenses Hearing aids Prescription 500 6,000 300 700 400 120 400 Kyle also made a $1,200 donation to the Canadian Breast Cancer Foundation a registered charity Other information Prescribed rates for 2020 Quarter One 2%; Quarter Two 2%; Quarter Three 1%: Quarter Four 1%. Required: Each team is required to calculate the net income for tax purposes, taxable income and federal and provincial (NL) income taxes for your client Kyle Brown. Even though Kyle has self- employment income from Quebec and Newfoundland, for the purposes of this assignment assume all income is taxed in Newfoundland and Labrador only. Please clearly identify any assumptions you make. Kyle is 38 years old and is married Kelsey who is also 38. They have three children Oskar who turned 6 in 2020; Mia who turned 15 and Gracle who turned 18 during the year. Mia has severe hearing loss and the Canada Revenue Agency has approved her for disability status. Gracie, who turned 18 is very responsible and worked three jobs in 2020 (even amid Covid!) to save money for her education. Her total employment income for 2020 was $13,500.2020 was a big year for Gracie as she started University. More details on that later! Up until the move to St. John's, Kelsey was a stay at home Mom, however when the family arrived in St. John's Kelsey was hired on a part time basis as a photographer. In 2020 she received a gross salary of $23,500 and paid $250 of union dues. She had $1,015 of CPP deductions; El of $450 and tax of $2,600 withheld from her salary. She also received $1,800 of interest income from a GIC she purchased three years ago that pays interest annually. So now that you have met the family, let's find out about Kyle. It's.. Property Income During the year, one of the Canadian public corporations of which Kyle is a shareholder issued him 100 additional shares as a stock dividend. The shares had a stated value of $40 per share. Kyle placed the shares in his safety deposit box along with his other securities. Also on July 1, 2018, Kyle purchased a four-year guaranteed investment certificate for $30,000 that bears interest at 10%. The interest compounds annually but is not payable until the end of the four- year term. Kyle did not include any amount of interest in his previous year's income. On January 2, 2020, Kyle sold a warehouse property that was located in Montreal for $180,000 (land $15,000, building $165,000). The building was used by Abstract Limited (Kyle's former employer in Montreal) to store inventory for resale. The company paid Kyle fair value rents for the building. Kyle ended the rental contract on December 31, 2019 so there was no rental income or expenses for 2020. The property was originally purchased at a cost of $140,000 (land $10,000, building $130,000). At the end of 2019 the building had an undepreciated capital cost of $110,000 Kyle received dividends from Atlantic Oil Limited in 2020 in the amount of $750. Kyle also owned shares of Nala Inc., which was a Canadian controlled private corporation and received non-eligible dividends in 2020 of $1,500. Page 7 Kyle's sister Felicia had needed money a few years ago and Kyle lent her $10,000 to invest in a business venture that has not proven to be very successful. She pays Kyle 4% interest per year and Kyle received his annual interest payment on December 21. Kyle also received interest of $850 from Canada Savings Bonds and $250 on his savings account at CIBC. He paid $100 to CIBC for his safety deposit box. Kyle received a dividend from Disney Corporation. Kyle received a cheque for $1,800 US which was net of a 10% withholding tax. On the day that Kyle received the dividend; $1 US was equal to $.98 Canadian. Kyle paid $250 Canadian on a bank loan from CIBC that he had for this investment. After winning $500,000 on the slot machine at the Bellagio Hotel in Las Vegas during a vacation in May 2019, Kyle decided to invest some of his newly acquired funds in real estate and mortgage some of the purchases as well. In 2019, he purchased the following properties: Property 23 Kensington Place 91 Opran Place 39 Reid Street 49 Bugler Avenue Land $10,000 12,000 20,000 30,000 Building $ 40,000 45,000 80,000 100,000 Total $ 50,000 57,000 100,000 130,000 Each of the properties is a single unit family home. Not all of the units were fully rented during 2019_and Kyle determined that his net rental position (before capital cost allowance) for each of the properties was as follows for 2019 23 91 Kensington Opran Place Place $4,000 $5,000 (6,000) (3.000) Property Rent revenue uansa 39 Reid Street $7,000 (6.000) 49 Bugler Avenue $12,000 19.000) 2.000 Total $28,000 (24.000) $ 4,000 49 bugel Avenue 30,000 100,000 130,000 Each of the properties is a single unit family home. Not all of the units were fully rented during 2019 and Kyle determined that his net rental position (before capital cost allowance) for each of the properties was as follows for 2019: Property Rent revenue Expenses* Income (loss) 23 91 Kensington Opran Place Place $4,000 $5,000 (6.000) (3.000) ($2.000) $2.000 39 Reid Street $7,000 (6.000) $1,000 49 Bugler Avenue $12,000 (9.000) $ 3.000 Total $28,000 (24,000) $ 4.000 * Property taxes, insurance, interest, maintenance. In 2019 when determining the classes to apply the available CCA, Kyle decided that CCA should be applied in the following order to the maximum allowed: 1. Kensington Place 2. Opran Place 3. Reid Street 4. Bugler Avenue In 2020, (the current year) one of Kyle's close friends ran into financial difficulty, and he was forced to sell two of the properties to provide financial assistance. He sold 23 Kensington Place for $52,000 (land $12,000, building $40,000) and 39 Reid Street for $110,000 (land $24,000, building $86,000). In 2020, the four properties (including the two sold properties to the Page 8 In 2020, (the current year) one of Kyle's close friends ran into financial difficulty, and he was forced to sell two of the properties to provide financial assistance. He sold 23 Kensington Place for $52,000 (land $12,000, building $40,000) and 39 Reld Street for $110,000 (land $24,000, building $86,000). In 2020, the four properties (including the two sold properties to the Page 8 date of sale) had the following receipts and disbursements. 23 91 Kensington Opran Place Place $4,000 $15,000 Property Rent revenue 39 Reid Street $7,000 49 Bugler Avenue $12,000 1,200 8,000 700 4,250 3,800 3,900 Interest expense Payments on principal Property tax Advertising Insurance Utilities Repairs and maintenance Cost to erect a garage 500 2,000 1,200 200 500 700 900 0 0 2,500 50 500 1,200 1,000 900 2,200 2,800 1,000 3,700 950 5,000 Kyle has decided that he wants to claim the maximum CCA available in 2020 and he wishes to take the maximum first from Opran and then from Bugler. Employment Income Kyle Brown was employed by two employers in 2020. From January 1, 2020 to August 31", 2020 Kyle worked in Montreal as the Sales Manager for Abstract Limited, a Canadian controlled private corporation. His base salary while employed in Montreal was $175,000. As sales manager, he was entitled to a small commission on the sales made by staff under his supervision. He received $7,500 in such commissions in 2020, which included $1,000 of commissions earned in late 2020 that were not received until 2021. All of Kyle's expenses related to his commission income were reimbursed by his employer. This totaled $1,250. Abstract Limited deducted the following from his salary in: Canada Pension Plan contributions $2,898 Employment Insurance premiums 856 Income tax 35,000 Private medical plan premiums 300 Union dues 500 Contributions to a registered pension plan 3,500 Reimbursement of personal use of employer vehicle 200 In addition to the above, the employer paid the following to Kyle or on his behalt Travel allowance Group term life insurance premiums for $50,000 coverage Premiums for a private medical insurance plan Amounts to a deferred profit sharing plan Contributions to a registered pension plan Golf club membership dues to Beacon Golf Club to entertain potential clients $2.400 600 300 2,000 3.500 6,000 Kyle used Abstract's summer camp for a one-month holiday and paid the employer S200 rent in 2020 for its use. When not being used by employees, the summer camp is rented for the fair value amount of 5600 per month, Although Kyle owned his own automobile, he was also provided with a company car. The ca cost the company $35,000. During the eight months employed by Abstract Limited, he drove total of 24,000 km, of which 16,800 was for personal use. The employer also paid of the operating costs, which amounted to $3,000 for Kyle's period of employment During the year, Kyle attended a shipping conference in Toronto. His wife travelled with him at the company's expense (51,000). The employer also permitted staff to purchase merchandise from its retail outlet at the company's cost. During the year, Kyle purchased for $800 merchandise with a retail value of $1,200. Kyle also was awarded a gift for meeting his sales targets during the year. The corporation gave him a $400 gift certificate for Jack Astor's Restaurant. In addition Kyle was given a new briefcase that Abstract Limited purchased from Staples Office Depot for $325, as a birthday gift. In the summer of 2020, Kyle and his family decided to move to St. John's NL to pursue a new career with Avalon Oil Limited (AOL) - a new oil exploration company whose shares were traded on the Toronto stock exchange Kyle was offered and accepted the position of Vice President of Human Relations. Kyle and his family moved to St. John's NL on September 15, 2020. Kyle, his wife Kelsey and their three children Oskar, Gracie and Mia all flew from Montreal to St. John's. Expenses related to the move were as follows: House hunting trip in July 2020 - hotel and airfare $2,300 Airfare for the family in September 2020 3,850 Allied Moving Company - to move household effects 13,900 Hotel and meals in St. John's while waiting for their new house - 23 days at $200 per day 4,600 Legal cost related to the sale of their home in Montreal 3,000 Legal costs to purchase a home in St. John's, NL 2,500 Cleaning costs to clean the house in Montreal before the sale closed 300 AOL paid Kyle $5,000 to Kyle to assist covering the moving costs. Kyle was paid a gross salary of $20,000 per month for September to December indusive. Amounts withheld from his pay during this period included the following Canada Pension Plan contributions $2,898 Employment Insurance premiums 856 30,000 Income tax Contributions to a registered pension plan 8,000 2,000 Private medical plan premiums Kyle and Kelsey had a difficult time selling their home in Montreal. They had purchased the house in 2015 for $400,000. However, the market in downtown Montreal in the summer of 2020 was quite depressed because of Covid 19, and the sale only resulted in net proceeds of $360,000. Avalon Oil Limited agreed to reimburse Kyle for 50% of the housing loss and this was paid to him in November 2020. Because the housing market in St. John's was booming even in a pandemic, AOL agreed to provide Kyle with a housing loan to assist purchasing his home in St. John's. A $100,000 loan was given to Kyle on October 1, 2020. The loan was interest free. AOL could not afford to purchase a vehicle for Kyle, so instead provided him with a vehicle allowance of $500 per month for his four months employment with the company in 2020. This was unreasonably low but Kyle felt that he would be duly compensated for this when the company grew in the future. Kyle was also required by his contract of employment to pay for certain employment related costs as well. AOL signed a 12 200 for Kyle for the 2020 tax year. Kyle incurred the following costs: Meals and drinks for customer entertainment $ 1,600 Golf club dues used to entertain customers 1,100 Travel-airfares and hotel lodging 3.000 Purchase of a cell phone 800 Cell phone bill-pay-as-you-go plan (employment related) 1,200 Automobile expenses: Operating costs 3,800 Parking 100 Interest on car loan 2,200 Purchase of new automobile 37,000 Kyle drove 8,000 kilometers from September 1, 2020 to December 31, 2020 and of this total, 4,800 kilometers were for employment related activities On October 1, 2020, Kyle was granted a stock option that was exercisable immediately and expired in 2023. Kyle could purchase 5,000 shares at an option price of $12.50 per share. At the date the option was granted, the shares of ADL were trading for $10.00 per share. On November 1, 2020 the price of the shares had risen to $14 per share as a result of a new oil find in Central Newfoundland, and Kyle decided to exercise his option to buy 5000 shares. To assist Kyle with the cash necessary to buy the shares, AOL, also gave Kyle a loan for $50,000. The loan was interest free and repayable on December 1, 2023. in 2020, Gracle was accepted to McGill University's Degree program in Opera Performance Kyle knew the tuition at McGill was higher in comparison to MUN, and while the first term costs were manageable from a cash flow basis, he was worried about the winter term of 2021. so in December to ensure cash flow to assist Gracle with her education, he sold 2,000 shares of AOL at a price of $18.25 per share. Pages Self-Employment Income Kyle is a self-proclaimed workaholic, and in addition to his employment, he also runsa successful business as a proprietor. He discovered that there was a great market for fixing screens on IPAD, I phones and really any other device that has a cracked screen as a result of a dropped device. He has been working on this business for the last five years and business actually didn't suffer on the move from Montreal to St. John's as it appears that there are a great number of phones that also meet pavement in St. John's as well The Income statement for 2020showed the following: Sales $1,300,000 Cost of sales 780,000 Gross profit 520,000 Administrative and selling expenses 451.000 69,000 Other income (expenses) 51.000 Net income before tax $ 120,000 Some additional information follows: 1. Administrative and selling expenses include the following $ 3,000 (a) Donations to registered charities (b) Amortization/depreciation of tangible assets 12.000 Note 1: At the end of the previous year (2019), the undepreciated capital cost of certain asset classes was as follows: Class 1 Class 8 Class 10 $80,000 92.000 50,000 Note 2: During the current year, the company sold its fand and building for $150,000 (and $40,000, building $110,000) and moved into leased premises. The original cost of the property was $130,000 and $30,000, building $100,000). The building had an accounting book value of $70,000 at the time of sale Note: The Company owns several pieces of equipment. During the year, one unit that originally cost $10,000 and had a book value of $6,000 was sold for 58,000 Pape 6 (c) Legal fees: Settling a dispute relating to the purchase of defective merchandise 4,000 Reorganizing the corporation's share capital 8,000 (d) Amortization 9,000 Note: The current year's amortization expense applies to a number of intangible assets. During the previous year (2019), the company took over a competitor and purchased goodwill for $40,000 and a franchise (unlimited life) for $10,000. (Hint You have to calculate the opening UCC for 2020) . During the current year, the franchise was sold for $8,000 when its book value for accounting purposes was $9,000. In addition, the company purchased an existing patent from a competitor for $20,000. The patent with a remaining legal life of 10 years was purchased on the first day of the current year. 2 Other income (expenses) includes the following: Gain on sale of land $10,000 Gain on sale of building 40,000 Gain on sale of equipment 2,000 Loss on sale of franchise (1,000 $51.000 Property Income During the year, one of the Canadian public corporations of which Kyle is a shareholder issued him 100 additional shares as a stock dividend. The shares had a stated value of $40 per share Kyle placed the shares in his safety deposit box along with his other securities. Also on July 1, 2018, Kyle purchased a four-year guaranteed investment certificate for $30,000 that bears interest at 10%. The interest compounds annually but is not payable until the end of the four year term. Kyle did not include any amount of interest in his previous year's income On January 2, 2020, Kyle sold a warehouse property that was located in Montreal for $180,000 (land $15,000, building $165,000). The building was used by Abstract Limited (Kyle's former employer in Montreal) to store inventory for resale. The company paid Kyle fair valuerents for the building. Kyle ended the rental contract on December 31, 2019 so there was no rental income or expenses for 2020. The property was originally purchased at a cost of $140,000 (land $10,000, building $130,000). At the end of 2019 the building had an undepreciated capital cost of $110,000 i rece dividends from Atlantico Limited in 2020s the amount of $750 viehe Cost to erect a garage 5,000 Kyle has decided that he wants to claim the maximum CCA available in 2020 and he wishes to take the maximum first from Opran and then from Bugler. Other Capital Dispositions I addition to other dispositions mentioned in previous sections, Kyle has also disposed of other capital items in 2020. He brings to your attention the following: Kyle sold the following items during 2020: 2010 Vehicle Antique cabinet A rare coin Shares in a public corporation Canoe Limited edition painting Sculpture Original Cost $24,000 1,000 100 4,000 500 800 1,100 Proceeds $10,000 2,000 1,100 3,000 600 2,500 900 Kyle had been purchasing some shares in a Canadian Junior mining company call Breex over the last three years as he felt the company was going to find a big mining site in Labrador and he was hoping for a big return. The shares were trading on the Toronto Stock exchange. His purchases were as follows: Page 9 10/11 500 Number of shares Date purchased Cost per share June 3, 2017 $5.00 August 31,2017 1,200 54.50 January 9, 2018 200 $5.75 May 18, 2019 600 $5.90 September 14, 2019 1,000 $6.10 On December 10, 2020 Kyle decided to sell half of his shares as the price of the shares had increased due to a mining site discovery. He sold half of his portfolio for $15.00 per share. Kyle also sold 500 shares of Brown Inc. which were qualifying small business corporation shares and hence eligible for the small business capital gains exemption. He had paid $1,000 for the shares and sold them for $250,000, Kyle has no cumulative net investment losses and has claimed $500,000 of his lifetime capital gains exemption in a prior year. Some additional tidbits Kyle was married when he was 20 years old and that marriage ended in divorce. There were no children but Kyle was ordered by the Family Court to pay his ex-wife alimony in the amount of $1,500 per month. He followed the court order and made the required payments in 2020. Kyle contributed $12,000 to his RRSP in 2020. His unused contribution room that was reported on his Notice of Assessment from 2019 was $10,000. He also contributed 55,000 to his tax-free savings account in 2020. This was the first time he has made any contribution Kyle and Kelsey paid $5,000 in 2020 for Oskar to attend daycare at Lakewood Daycare. They also paid $7,000 for an after school program for Mis Oskar also played soccer during the year and the cost of the program was 5600 for the entire year. As noted earlier, Gracle started at McGill full time in Fall 2020. Tuition fees paid were 56,000 and she attended 4 months full time in 2020. Kyle also spent $4,000 on residence fees for Gracle to live on campus. Gracie moved to Montreal in the fall of 2020, as McGill did require performance students to be in Montreal for lessons. They also provided her with $4,800 of pocket money during this period. Gracle has agreed that if there are any tax credits available that can be transferred to Kyle or Kelsey, then she wished the transfer to occur In addition to the private health services plan premiums that Kyle had withheld from his pray for the family plan, the following medical expenses were paid in 2020 that were not covered by any Insurance plan 11 / 11 Oskar Kyle $300 100 Gracie $100 Mia $200 $200 Kelsey $300 100 400 Dental Optometrist Contact lenses Hearing aids Prescription 500 6,000 300 700 400 120 400 Kyle also made a $1,200 donation to the Canadian Breast Cancer Foundation a registered charity Other information Prescribed rates for 2020 Quarter One 2%; Quarter Two 2%; Quarter Three 1%: Quarter Four 1%. Required: Each team is required to calculate the net income for tax purposes, taxable income and federal and provincial (NL) income taxes for your client Kyle Brown. Even though Kyle has self- employment income from Quebec and Newfoundland, for the purposes of this assignment assume all income is taxed in Newfoundland and Labrador only. Please clearly identify any assumptions you make