PROBLEM SIX (COMPREHENSIVE) Charlotte Martin is a lawyer. For five years, until June 30,2022 , she was employed by Roedhouse Ltd., a national hotel chain. On July 1, 2022, she began to practise law as a sole proprietor from an office in her home. Charlotte has asked you to prepare her 2022 income tax return. At a recent meeting. you gathered the information provided in Exhibits I and II. Eblibit I: Work at Roadhouse and Law Practice (2022)

2. Charlotte's salary to June 30 was $ 70,000. From this, Roadhouse deducted EI and CPP of $4,453(includes CPP enhanced contributions of $ 461 , income tax of $13,000, and $400 for Charlotte's portion of the private group medieal 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 52,100. Charlotte drove her car 16,000 km, of which 12,000 km 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 ber accumulated frequent-flyer points to obtain free airline tickets for a vacation. As a result, they each saved the $800 airfare:

4. In 2020, Charlotte borrowed $ 60,000from Roadhouse. She paid interest at 1%on the loan. Charlotte used the borcomed 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 was 3% throughout 2022].

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 2019. At that time, the shares were appraised at $ 12. Roadhouse Ldd. 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.

6. 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 $4,000and a legal library for$ 5,600

7. On July 4, Charlotte purchased an automobile for $ 64,000 plus HST. She used the car 60% of the time for her law practice. 8. For the six months ended December 31, 2022, the financial statements of Charlotte's law practice showed a profit of $164,000 The gross revenue of $194,000 consisted of the following:

if for the entire 10. Charlotte usi 80-square-mi The financlal statements do not include the home-office costs. Ocher Financial Information (2022)

1. Charlotte owns a residential rental ptoperty, which she had purchased in 2020. Details of the rent and expenses in 2022 are as folle As of December 31, there were no unpaid rents from the tenant.

2. Charlote contribated $ 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.

3. The following additional recelpts and disbursements occurred during the year: 4. Charlotte recelved 100 shares of TXE Lid., a public corponation. 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 58 . She sold the 100 stock dividend shares in December, at $7.

3. Charlotte's spouse earned $ 110,000 in 2022. 6. In 2020, while employed at Roadhouse, Charlotte attended a national law convention. She deducted her expenses of $2,300 on her 2020 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 2022, Charlotte received a reassessment notice from the CRA disallowing the entire convention expense deduction. Now that Charlotte is practising law, she will attend the 2023 convention to upgrade her skills. 7. A review of Charlotte's 2021 tax return shows the following:

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 2022 taxation year.

(b) Based on your answer to part (a), calculate Charlotte's federal income tax for the 2022 taxation year. (c) Why did the CRA deny the deduction of Charlotte's 2020 convention expenses? Can she obtain a deduction for the proposed 2023 convention? If so, why?