Please go into detail for each point and show calculations and give explanations for each as well. Please answer each part properly as there are parts a, b, and c.

Charlotte Martin is a lawyer. For five years, until June 30, 2023, she was employed by Roadhouse Ltd., a national hotel chain. On July 1, 2023, she began to practise law as a sole proprietor from an office in her home.

Charlotte has asked you to prepare her 2023 income tax return. At a recent meeting, you gathered the information provided in Exhibits I and II.

Required:

a) Determine Charlotte's net income for tax purposes in accordance with the aggregating formula of Section 3 of the Income Tax Act and her taxable income for the 2023 taxation year.

b) Based on your answer to part (a), calculate Charlotte's federal income tax for the 2023 taxation year.

c) Why did the CRA deny the deduction of Charlotte's 2021 convention expenses? Can she obtain a deduction for the proposed 2024 convention? If so, why?

Exhibit I: Work at Roadhouse and Law Practice (2023)

1. Charlotte's salary to June 30 was $90,000. From this, Roadhouse deducted EI and CPP of $4,756 (includes CPP enhanced contributions of $631), income tax of $21,000, and $400 for Charlotte's portion of the private group medical insurance premium. An additional premium of $400 was paid by Roadhouse. Also, Roadhouse paid the $800 premium for Charlotte's group term life insurance coverage of $100,000.
2. On June 30, Charlotte returned the company car that Roadhouse had provided her. The car cost $32,000, and Roadhouse's undepreciated balance was $18,000. Roadhouse also paid the operating costs for the car, which amounted to $2,100. Charlotte drove her car 16,000 kilometres, of which 12,000 kilometres were for business use.
3. Charlotte travelled by air when working for Roadhouse.Charlotte used her personal credit card and accumulated frequent flyer points. She was reimbursed by Roadhouse for travel costs.In March, she and her partner used some of her accumulatedfrequent-flyer points to obtain free airline tickets for a vacation.As a result, they each saved the $800 airfare.
4. In 2021, Charlotte borrowed $60,000 from Roadhouse. She paid interest at 1% on the loan. Charlotte used the borrowed funds for the down payment to purchase a rental property. Charlotte repaid the loan on June 30 when her employment ended. [Assume CRA's prescribed interest rate for taxable benefits was 3% throughout 2023].
5. On June 30, Charlotte sold 500 shares of Roadhouse Ltd. for $20 per share to the company's controlling shareholder. Roadhouse issued the shares to Charlotte at $10 in 2020. At that time, the shares were appraised at $12. Roadhouse Ltd. is a Canadian-controlled private corporation. At the time of the share sale, all of Roadhouse's assets were being used in an active business.

Charlotte began practising law from her home office on July 1 and registered for HST. She purchased the client list and files of a retiring lawyer for $50,000. She also purchased a computer for $4,000 and a legal library for $5,600.

1. Charlotte began practising law from her home office on July 1 and registered for HST. She purchased the client list and files of a retiring lawyer for $50,000. She also purchased a computer for $4,000 and a legal library for $5,600.

1. On July 4, Charlotte purchased an automobile for $64,000 plus HST. She used the car 60% of the time for her law practice.

1. For the six months ended December 31, 2023, the financial statements of Charlotte's law practice showed a profit of $164,000. The gross revenue of $194,000 consisted of the following.

Table Summary: The table has two columns. Column one, row three is blank.

Fees billed and received $170,000

Fees billed but not received at year-end 24,000

$194,000

9 Operating expenses for the law practice included the following.

Liability insurance	2,200
Depreciation and amortization	9,100
Reserve for bad debts	1,200
Golf club dues: while attending the club, clients are entertained approximately 30% of the time	1600
Charitable donations	1,800
Promotion: client lunches	400
Secretarial services	12,000
Computer software: word processing and billing program	900

10. Charlotte uses 12 square metres of her house exclusively as an office for her law practice. Expenses for the entire 80-square-metre home for all of 2023 consist of the following.

Table Summary: The table has two columns. Column one, row five is blank.

Insurance $700

Mortgage interest 9,000

Property taxes. 2,300

Utilities 3,000

$15,000

The financial statements do not include the home-office costs.

Exhibit II: Other Financial Information (2023)

1. Charlotte owns a residential rental property, which she had purchased in 2021. Details of the rent and expenses in 2023 are as follows.

Table Summary: The table has three columns. Column one, row five is blank.

Column two, rows one and five are blank.

Column three, rows two and three are blank

Rental $6,000

Repairs and maintenance $ 1,200

Property tax 900

Interest on first mortgage 3,300 (5,400)

$ 600

As of December 31, there were no unpaid rents from the tenant.

1. Charlotte contributed $11,000 to her RRSP and another $1,000 to a spousal RRSP during the year. She has contributed the same amount to the spousal plan for the past four years. On December 20, her spouse withdrew $4,000 from this spousal account.

1. The following additional receipts and disbursements occurred during the year.

Paid dental fees $2,900

Paid contributions to a registered federal political party 1,400

Paid interest on late payment of 2022 income tax 240

Received cash dividends (non-eligible) on

Roadhouse shares 1,000

Received proceeds from the sale of a silver tea set (original cost: $1,600) 1,100

1. Charlotte received 100 shares of TXE Ltd., a public corporation.The shares were a stock dividend (eligible) on the 2,000 shares she had purchased at $4 per share five years ago. At the time of the stock dividend, the shares were trading at $8. She sold the 100 stock dividend shares in December, at $7.

1. Charlotte's spouse earned $110,000 in 2023.

1. In 2021, while employed at Roadhouse, Charlotte attended a national law convention. She deducted her expenses of $2,300 on her 2021 tax return. Her employer willingly gave her the time off from work to attend the convention even though it was not

directly related to her work. In 2023, Charlotte received a reassessment notice from the CRA disallowing the entire convention expense deduction. Now that Charlotte is practising law, she will attend the 2024 convention to upgrade her skills.

7. A review of Charlotte's 2022 tax return shows the following.

Maximum RRSP deduction available in 2023 $10,500

Capital gains deductions claimed in past years 75,000

Net income from real estate rentals (after deducting a reserve for uncollectible rents of $500) 860

Undepreciated capital cost: Class 1 (rental property) 52,000

Reserve for unpaid rents 500

Required:

1. Determine Charlotte's net income for tax purposes in accordance with the aggregating formula of Section 3 of the Income Tax Act and her taxable income for the 2023 taxation year.

1. Based on your answer to part (a), calculate Charlotte's federal income tax for the 2023 taxation year.

(c) Why did the CRA deny the deduction of Charlotte's 2021 convention expenses? Can she obtain a deduction for the proposed 2024 convention? If so, why?