Question #1 Reporting Rental Income (35 marks)

Mr. and Mrs. Fox acquired a rental property on January 2, 2022 in the City of Ottawa. Although it is generally difficult to rent a property during the coldest winter months in Ottawa, the homeowners were happy to find a tenant to rent the property beginning January 2nd with the help of an agent. Here are the details of the property purchase and associated costs:

Total purchase price + associated costs: $435,000 ($200,000 attributed to land value) Property address: 222 Carling Avenue, Ottawa, ON. K2A 1V4

Rent Collected: $1,850/month for all twelve months

Expenses: Advertising Insurance

Mortgage interest

Agent`s fee for finding tenant Property Taxes

$125

$950 (prepaid for two years) $9,000

$1,850

$4,000

In addition to rental income from the new property, Mr. and Mrs. Fox continue to rent out a room in their home to an Algonquin College student.

The address of their home is 111 Spring Garden Street, Nepean, ON, K2G 2S3. A student occupies 10% of their home.

Rent Collected: $350/month for all twelve months

Expenses: Insurance Mortgage interest

$1,200 (prepaid for two years) $5,350

$4,000

$3,000

Property Taxes

Utilities

**CCA will not be claimed on any asset for this home property

Mr. and Mrs. Fox each own 50% of their home and the rental property on Carling Avenue.

(a) Explain how income would be split (% allocated to each spouse) between Mr. and Mrs. Fox and

how you would reflect this in form T776 so that it carries out the proper calculations? (3 marks)

(b) Explainhowyouwouldenter(inFormT776)informationpertainingtothe10%useofthehome by the student. How will this impact the amount of expenses Mr. and Mrs. Fox can claim with respect to the rental of a portion of their home. (2 marks)

(c) Calculate the amount of rental income that would be included in Mrs. Foxs income for the 2022 taxation year. Each taxpayer will claim 50% of the total CCA. (30 marks)

Calculations can be calculated manually or in PROFILE and submitted as either a Word document or Excel document. If the ProFile schedule is submitted you need to identify the response to Part c either by highlighting the number in the ProFile Schedule or in a separate document. Please be sure to show/explain your work as marks are awarded for the calculations.

PROFILE Helpful Tips and Notes:

If using PROFILE to carry out the above calculations, use a separate T776 for each rental property. It is possible to combine more than one property on a T776 however you would have to add all expenses together. In this case, the expenses relating to the rental of the home have a personal use % and therefore are only 10% deductible. This does not apply to the Carling Avenue property therefore the expenses cannot be simply added together. Any amount entered in the Personal use percentage box will automatically be applied to all expenses, even if some of them are not subject to the limitation. You do not want the personal use rate applied to expenses that are fully deductible.

To create a second T776: Go to Form Explorer In the form search box enter T776#2

If you are claiming CCA on a property that is split between co-owners (for example, in this case spouses), the amount entered as an addition to a CCA class would be the total amount multiplied by the taxpayers percentage ownership. For example, if the total cost of the property is $235,000 and each taxpayer owns 50%, add $117,500 to the CCA class for each taxpayer ($235,000 x 50%).

of theik home \begin{tabular}{|c|c|c|} \hline \multirow[t]{4}{*}{ Enpmes: } & nurumes & \\ \hline & Menche interent & 5556 \\ \hline & Maperty Tanen & \$NDO0 \\ \hline & verain & 53000 \\ \hline \end{tabular} te enomine that ane faly deflumbly. tarpore thas, coe x seny arrat folinew Artain: seres Bont whetieip