Problem 1' Mr. Richmond, a newr client, has Invested in rental properties, principal residenms and other capital propertyr Twith Inheritance monies and other liquid rash. l-Ie wonder; you with the following information with respect to his 21113 taxation year. Mr. Richmond is employed by Wealth lnc., a Gansdian-oontrolled private oorporation, and reoeiyed the following income and benets: (ll Salary {net} .............................................. $49,953 Payroll deduction: lneome taxes .................................. $15,l0[|' UPP ......................................... 2,356 El .......................................... 39] Registered pension plan (dened benet: current service] 3730 22:04? \"2,000 (2] Hr. Rid'unond paid professional fees of $500 to the Professional Engineers of Ontario. [ft] Hr. Richmond. who is engaged in negotiating (:0nt for his employer, reoeired for the entire year a monthlyr alltrwanoe for travelling and car expenses of $550 and 56m, respediteiy. In September of 2013, Mr. Richmond sold his car for $12,500 and purchased a new car costing $35,000, including HST of [396. Mr. Richmond purchased his previous car in Januaryr 20\"] for $32,000 plus HST. The Hill] at January I, 2013 was $14,200. DEA. has been taken each year on a prorated basis to reflect the use for employment purposes. Mr. Richmond's kilometres for personal use 1nrere 635D out ofa total kilometres of sense. Mr. Richmond's employment contract requires him to Use his own car and pay all of his expenses. Travelling expenses: Mesh ............................................ $ 3,500 coonunodation .................................... 4,501] Gas and oil ........................................ 2,100 lnsuranoe ......................................... EDI] Haintenanoe ....................................... 50E! Licenoe .......................................... 131] Ekunslon, Milligrams [4] Hr. Rielunond sold two lots of his stock options. He provide YO" 1with the following: lst lotlm shares sold on March 15, 2013, for $216.51} per share. These shares were pur- chased in Februaryr 21106 for 58 at which time the shares were valued at SID. 51]. 2nd lot Elli] shares sold on Deoernber 5, 2013, for $25 per share. 'Ihese shares Were pur- chased on hp ril 12 21312 for $15 at "'lilltlh time the shares Were valued at $21. The fair market value at the date of grant was 51?. 11.8?5 Ch. TWGalmpei-sonal (5] Mr. Richmond received an interest-free loan of $2,130!) on March 12, 21313, to enable him to purchase shares of Wealth lne. The loan was outstanding until the shares were sold on December 5, at whim time the loan was repaid. Asmme that the presumed rate throughout the year was 7%. In addition, during EDIE, Mr. Richmond received the follondrrg income from various sources including oertain capital dispositions. [Al ll'lr. Richmond sold the folloWing assets: Cost Proceeds Antique foot stml ................................ $1.1m $ son Painting ....................................... Q 1,500 Stamp oolleotion ................................. 25] RED {B} During 21.112, hlr. Rielunond sold his two residences, In order to purchase a larger horne In an expensive suburb. The following facts relate to these two residenoes: Dubs misused Cost 6mm Proceeds GM hum ........ 2204 $95,003 1121,1300 $350,021} Cottage __________ [299 15,500 12,001] 200,000 431 [0} In addition to his residences, Mr. Richmond owns two rental properties. The following informa- tion pertains to these too properties: WeahierSi mm St Cost of land ..................... $30,000 $100,000 Gust. of building .................. $55,000 3 00,000 LIGGJanuar}r l, 2013, Glass 1 ...... $33,000 3 05,000 Rental revenue in 2013 ............. $13,000 5 T,ti00 Expenses: Taxes [property] ______________ $ 2,100 3 1,300 {Jther expens ............... 4,000 E,l00 Mortgage interest .............. 3,000 Nil M 5 7.900 The Riohrnount St rental prt::np-ert.:,r was sold in November for prone-eds of $250,000 less $0,000 of selling ooste. or the proceeds, $140,000 was for the land. Mr. Richmond purchased the 1|Wealthier St rental prioperigjr by placing a mortgage on his home. His monthly payments are $450 per month, of which 5300 per month represents inte1*eet. {D} Mr. Richmond gilted his wife $10,000 in June 2013 to allow her to inved. in the stool: market. Mrs. Ridunond decided to be a cautious investor for the first while; as a result, she invested the \"0,000 in Treasury Bills which earned $000 from June to Deoember 2013. (E) In addition, Mr. lliclunond decided to provide his wunger brother, who Is 22, with a non- interest 093nm loan of $5,000 to allow him to oomplete his Masters in Marine Biology. liir. Richmond's brother paid his tuition fees with the funds. [F] Mr. Rielunond gifted $8,500 to each of his twin children, Dollar and Garnp, aged 15. Both children placed their monies in high interest-hearmg savings accounts each receiving Intere. of $1,050 in 2013. [G] Mr. Iticlnnond received dividends from the following Investments: Foreign 0o.a foreign oorporstion {net of $33 withlmldlng tax} . . . . . . . . $500 Wealth Inc. a median-controlled private corporation {from income taxed at the Ion.r onrporate rate} ................................. 000 {H} Mr. Richmond name two mutual funch, DLunarlt Mutual Fund and Paget Mutual Fund. He received a T3 slip from Dmnark Mutual Fund indicating the following income amounts allocated to his account and reinvested in mm; \".815 132 FedsmttnmrnsTaxadan:Fundamsmats Gapitalgains $1,200 Actualamountot'dlvidends................................... 347 Taxableamountoi'dhridends.................................. 500 Mr. Riclunond had invested 520,1]{10 in the Diunarit Fund in 3'312. This resulted in the purchase of 1.6411324 units of the fund. In 2012, income of $46.31 was allocated to his account and reinmted. The reinvestment resulted in the nominees. of 3345 units at the market value of $121144 per unit. The 21113 income allocation resulted, on reinmtment of the $1,544.9'i', in the purchase of 119353 units at the market value of $12.th per unit. Late in 2MB, alter the income allocation, Hr. Richmond sold 1,001] units for a total of $12,331. He also reoeived a T5 slip from Paget Mutual Fund indicating that he had reoeiu'ed a SEED capital gains dividend during 2U13. {I} Mr. Ricl'uncnd sold a sinuses Govermnent of Canada bond for $1 15,321\". This bend paid interest semi-annually.r at an interest rate which was much higher than current interest rates. The proceeds received of $1532? Included accrued interest of $5.323. Hr. Riciunond had purchased the bonds on the open market for $93.00!}. [J] In 20\"], Mr. Richmond loaned MERLIN to his brother-invlant's companyr which was a small business corporation. The loan paid interest at corrunercial rates, but no interest was received in 20K! because the company went into receivership. Assn unsecured creditor. Mr. Richmond received it! cents on the dollar ($12,000) In 2013 In an payment or this loan. [H] Hr. Richmond has a listed personal pronerlnr loss, carried foo-ward from 2011?, of tens. WIRED Dam-mane Hr. Richmond's Division B inmme warding m the nrdering rules in sectinn 3 for 21113. Hume that Mr. Richmond clamped l'r of his capital gains Exemption in prior years. lgnnrn the effects {if the lap year