Personal Tax Assignment Problem George Pharmacy is a pharmaceutical salesman who has been very successful at his job in the last few years Unfortunately, his family life has not been very happy Three years ago, his only child, Anna, was driving a car that was hit by a drunk driver She and her husband were killed and their 13 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, Parkinson'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 requirements necessary to qualify for Canadian Old Age Security payments Valeries 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 on line bank account Georges brother, Martin, completed an alcohol rehabilitation program after being fired for drinking 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 available education related amounts to George Although Martin plans to file his 2015 tax return, he has not done so yet In addition to Georges 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 Other information concerning George for 2015 is given on the following pages Required Prepare the 2015 income tax return of George Pharmacy using the CANTAX tax software program assuming Valerie does not file a tax return so he is not eligible to claim the Family Tax Cut (Answer No to the question Are you eligible to claim the Family Tax Cut on S1A ) List any assumptions you have made, and any notes and tax planning issues you feel should be placed in the file Ignore HST implications in your solution by assuming that George does not qualify for the GST HST rebate Title Mr First Name George Last Name Pharmacy SIN 527 000 509 Date of birth (Y M D) 1951 07 02 Marital Status Married Canadian citizen Yes Provide information to Elections Canada Yes Own foreign property of more than $100,000 Canadian No First Name Valerie Kevin Joan Last Name Pharmacy Pharmacy Drugstore SIN 527 000 483 527 000 517 None Date of birth (Y M D) 1950 12 30 1999 10 17 1930 02 24 Net income $6,520 Nil $500 $5,800 in CPP and $720 in UCCB First Name David Martin Last Name Drugstore Pharmacy SIN None 527 000 533 Date of birth (Y M D) 1931 01 12 1968 06 02 Net income Nil $8,300 For 2015, George received two children's fitness tax receipts, one from a swim club for $300 and one from a summer day camp for $900 He also received a children's arts tax receipt of $250 for a course at a local theatre school During September, David was arrested in Chile Valerie had to spend three weeks in Chile and $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 Tuition fees for Martin Pharmacy (brother) A 6,000 Number of months in school part time B 0 Number of months in school full time C 8 Issuer Mega Pharma Inc Employment income 14 378,000 00 Employees CPP contributions 16 2,479 95 Employees EI premiums 18 930 60 Income tax deducted 22 114,000 00 Employment commissions 42 82,000 00 Charitable donations 46 400 00 During 2015, Mega reimbursed George $3,788 for meals and entertainment with clients,$2,268 for hotels and $4,925 for airline tickets They made the following donations Valerie Mothers Against Drunk Drivers (MADD) 1,000 George Canadian Institute For The Blind (CNIB) 3,000 George is not eligible for the first time super donor tax credit George paid the following medical expenses for his family 2015 12 31 George Johnson Inc Out of Canada insurance 731 00 2015 08 31 George Dr Smith Dental fees 155 40 2015 09 19 George Optician Prescription glasses 109 00 2015 11 07 Valerie Pharmacy Prescription 66 84 2015 06 07 Joan Dr Wong Psychiatric counseling 2,050 00 2015 03 22 David Tropical DiseaseCentre Prescription 390 00 2015 12 20 Martin Dr Walker Group therapy 6,000 00 2015 10 01 Kevin Dr Takarabe Orthodontics and Dental 30,000 00 George paid $800 for the care and feeding of Kevins Seeing Eye dog, Isis, during 2015 George is required to have a home office by his employer He provided the following details regarding his home office expenses Area of home used for home office (square feet) 650 Total area of home (square feet) 5,000 Telephone line including high speed internet connection 620 Hydro 3,200 Insurance House 4,000 Maintenance and repairs 3,800 Mortgage interest 6,200 Mortgage life insurance premiums 400 Property taxes 6,700 During 2015, 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 At the beginning of 2015, George had a net capital loss carry forward of $10,500 from the sale of shares in 2014 He had not disposed of any capital assets prior to 2014 He sold the following assets in 2015 Description Molson Inc shares Imperial Oilshares Sailboat Number of units 150 387 N A Year of acquisition 2012 2013 2013 Date of disposition February 14 June 6 October 1 Proceeds of disposition 37,000 9,600 74,000 Adjusted cost base 27,600 12,100 72,000 Outlays and expenses 35 29 N A Description Motorcycle Painting Coin collection Year of acquisition 2015 2008 2012 Date of disposition November 17 August 28 March 24 Proceeds of disposition 14,000 1,100 700 Adjusted cost base 21,000 450 1,800 Outlays and expenses N A N A N A George had rental property and provided the following information related to it Address 888 YYZ Drive, Toronto, Ontario M0M 0M0 Year of purchase 2011 Gross rents 16,000 Property taxes 5,128 Insurance 1,890 Interest on mortgage 3,175 Payment on principal 2,200 Furnace repairs 550 Maintenance contract 3,469 Building purchased for $120,100 UCC beginning of year 107,441 Fixtures purchased for $8,500 UCC beginning of year 4,651 The building and fixtures were purchased on August 28, 2011 At the time the building and fixtures were being used as a drugstore and Mr Pharmacy has retained the same tenant Required Prepare Mr Pharmacys 2015 income tax return using the CANTAX tax software program assuming Natasha does not file a tax return so he is not eligible to claim the Family Tax Cut (Answer No to the question Are you eligible to claim the Family Tax Cut on S1A ) List any assumptions you have made, and any notes and tax planning issues you feel should be placed in the file

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Personal Tax Assignment Problem: George Pharmacy is a pharmaceutical salesman who has been very successful at his job in the last few years. Unfortunately, his

Personal Tax Assignment Problem:

George Pharmacy is a pharmaceutical salesman who has been very successful at his job in the last few years. Unfortunately, his family life has not been very happy. Three years ago, his only child, Anna, was driving a car that was hit by a drunk driver. She and her husband were killed and their 13 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, Parkinson'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 requirements necessary to qualify for Canadian Old Age Security payments.

Valeries 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 on-line bank account.

Georges brother, Martin, completed an alcohol rehabilitation program after being fired for drinking 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 available education related amounts to George. Although Martin plans to file his 2015 tax return, he has not done so yet.

In addition to Georges 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.

Other information concerning George for 2015 is given on the following pages.

Required: Prepare the 2015 income tax return of George Pharmacy using the CANTAX tax software program assuming Valerie does not file a tax return so he is not eligible to claim the Family Tax Cut. (Answer No to the question "Are you eligible to claim the Family Tax Cut" on S1A.). List any assumptions you have made, and any notes and tax planning issues you feel should be placed in the file. Ignore HST implications in your solution by assuming that George does not qualify for the GST/HST rebate.

Title

Mr.

First Name

George

Last Name

Pharmacy

SIN

527-000-509

Date of birth (Y/M/D)

1951-07-02

Marital Status

Married

Canadian citizen?

Yes

Provide information to Elections Canada?

Yes

Own foreign property of more than $100,000 Canadian?

First Name

Valerie

Kevin

Joan

Last Name

Pharmacy

Drugstore

SIN

527-000-483

527-000-517

None

Date of birth (Y/M/D)

1950-12-30

1999-10-17

1930-02-24

Net income

$6,520*

Nil

$500

*$5,800 in CPP and $720 in UCCB

First Name

David

Martin

Last Name

Drugstore

Pharmacy

SIN

None

527-000-533

Date of birth (Y/M/D)

1931-01-12

1968-06-02

Net income

Nil

$8,300

For 2015, George received two children's fitness tax receipts, one from a swim club for $300 and one from a summer day camp for $900. He also received a children's arts tax receipt of

$250 for a course at a local theatre school.

During September, David was arrested in Chile. Valerie had to spend three weeks in Chile and $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.

Tuition fees - for Martin Pharmacy (brother)

6,000

Number of months in school - part-time

Number of months in school - full-time

Issuer - Mega Pharma Inc.

Employment income

378,000.00

Employees CPP contributions

2,479.95

Employees EI premiums

930.60

Income tax deducted

114,000.00

Employment commissions

82,000.00

Charitable donations

400.00

During 2015, Mega reimbursed George $3,788 for meals and entertainment with clients,$2,268 for hotels and $4,925 for airline tickets.

They made the following donations:

Valerie

Mothers Against Drunk Drivers (MADD)

1,000

George

Canadian Institute For The Blind (CNIB)

3,000

George is not eligible for the first time super donor tax credit.

George paid the following medical expenses for his family:

2015-12-31

George

Johnson Inc.

Out of Canada insurance

731.00

2015-08-31

George

Dr. Smith

Dental fees

155.40

2015-09-19

George

Optician

Prescription glasses

109.00

2015-11-07

Valerie

Pharmacy

Prescription

66.84

2015-06-07

Joan

Dr. Wong

Psychiatric counseling

2,050.00

2015-03-22

David

Tropical DiseaseCentre

Prescription

390.00

2015-12-20

Martin

Dr. Walker

Group therapy

6,000.00

2015-10-01

Kevin

Dr. Takarabe

Orthodontics and Dental

30,000.00

George paid $800 for the care and feeding of Kevins Seeing Eye dog, Isis, during 2015.

George is required to have a home office by his employer. He provided the following details regarding his home office expenses.

Area of home used for home office (square feet)

650

Total area of home (square feet)

5,000

Telephone line including high speed internet connection

620

Hydro

3,200

Insurance - House

4,000

Maintenance and repairs

3,800

Mortgage interest

6,200

Mortgage life insurance premiums

400

Property taxes

6,700

During 2015, 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.

At the beginning of 2015, George had a net capital loss carry forward of $10,500 from the sale of shares in 2014. He had not disposed of any capital assets prior to 2014. He sold the following assets in 2015:

Description

Molson Inc. shares

Imperial Oilshares

Sailboat

Number of units

150

387

N/A

Year of acquisition

2012

2013

Date of disposition

February 14

June 6

October 1

Proceeds of disposition

37,000

9,600

74,000

Adjusted cost base

27,600

12,100

72,000

Outlays and expenses

N/A

Description

Motorcycle

Painting

Coin collection

Year of acquisition

2015

2008

2012

Date of disposition

November 17

August 28

March 24

Proceeds of disposition

14,000

1,100

700

Adjusted cost base

21,000

450

1,800

Outlays and expenses

N/A

George had rental property and provided the following information related to it:

Address - 888 YYZ Drive, Toronto, Ontario M0M 0M0

Year of purchase

2011

Gross rents

16,000

Property taxes

5,128

Insurance

1,890

Interest on mortgage

3,175

Payment on principal

2,200

Furnace repairs

550

Maintenance contract

3,469

Building purchased for $120,100 - UCC beginning of year

107,441

Fixtures purchased for $8,500 - UCC beginning of year

4,651

The building and fixtures were purchased on August 28, 2011. At the time the building and fixtures were being used as a drugstore and Mr. Pharmacy has retained the same tenant.

Required: Prepare Mr. Pharmacys 2015 income tax return using the CANTAX tax software program assuming Natasha does not file a tax return so he is not eligible to claim the Family Tax Cut. (Answer No to the question "Are you eligible to claim the Family Tax Cut" on S1A.). List any assumptions you have made, and any notes and tax planning issues you feel should be placed in the file.