Question 1: Taxable Income

Emma Richards is an employee of Paragon Industries (PI). PI is a Canadian controlled private corporation. Emma works in the accounting department as a capital assets accountant.

Emma is in the process of completing her 2020 personal income tax return.

Required:

Emma needs your help to calculate her Taxable Income for 2020.

She has compiled the following information regarding to her transactions in 2020:

Salary (gross)	$85,000
Deductions
Canada Pension Plan (CPP)	$2,732
Employment insurance (EI)	856
Income tax	10,800
Registered pension plan	3,500
Private health and dental plan premiums	250
Disability insurance premiums	600
Reimbursement for use of company car	950

PI paid the following amounts on her behalf:

CPP and EI	$3,930
Private health and dental plan premiums	250
Group term life insurance	350
Disability insurance premiums	250
Registered Pension Plan	3,000

Other information:

1. As part of her employment duties, Emma is required to travel to different company branches throughout Alberta to perform accounting tasks. PI provides her with a 2020 Toyota Prius and paid for all of the operating expenses. She drove the vehicle a total of 31,000 km in the year with 8,000 being for personal usage. The vehicle was purchased by PI for $47,000. It was available for her use for the entire year. The operating expenses for the year totaled $8,500.

2. The disability plan was implemented in 2017. Emma paid $200 in annual premiums in 2018 and

$500 in 2019. In the current year, as a result of an unfortunate accident she sustained an injury and was unable to work. She was off for 6 weeks and collected $8,000 from the insurance company.

3. On January 1, 2020, PI implemented a stock purchase plan for all employees giving them the opportunity to purchase up to 5,000 common shares at $10 per share. At that time the shares were valued at $5.00 per share. On February 14, 2020 she purchased 5,000 shares when they were valued at $18 per share. She sold 2,000 shares for $30 per share on September 27, 2020.

4. PI has a policy of paying for certain counseling services for employees. PI paid $800 for Emma's counseling fees relating to her depression from her divorce.

5. PI held a contest open to all their employees to come up with a new corporate slogan. Emmas entry won and she received $500.

6. On April 1, 2020 PI gave Emma a $150,000 low interest loan to purchase a condo at 1%, the relevant prescribed rate is 2.5%. As she is required under her employment contract to set up a home office, she required more space. Her expenses for the year are as follows: mortgage interest

$5,800; property tax $2,400; electricity and water $1,215; natural gas $675; toilet repairs $500. Emma uses 10% of her condo as home office.

7. Emma is 42 years old and got divorced on January 01, 2020. She has two daughters aged 18 and 7 who decided to live with her. The older daughter is a full-time university student. She attended Royal Roads University for eight months and paid her own tuition fees of $5,500. Her mother gave her an $800 monthly allowance to cover her books and other expenses. In 2020, she earned

$6,800 from her summer job. She will transfer any unused tuition credits to her mother (Emma).

8. Emma has a rental property. At the beginning of the year, UCC of the house was $150,000, and UCC of the appliances was $2,500. The house was rented out for $900 per month for 12 months. Expenses for the whole year were: $1,900 property tax; $1,200 utilities; $400 maintenance. Emma would like to claim the maximum allowable CCA to minimize her tax payable.

9. Emma had the following receipts in 2020:

Bonus for 2019 received January 4, 2020	5,000
Ineligible dividend from PI actual amount Eligible Dividend from ABC actual amount	2,500 1,470

10. Emma paid the following amounts in 2020:

Legal fees appealing 2018 CRA assessment	900
Dues to the Accounting Association	600
Canadian Western Bank safety deposit box rental	75
RRSP (contribution made February 15, 2021)	4,500
Taxes and interest on unsuccessful appeal above	14,200
Physiotherapy treatments	2,000
Dentist for herself	500
Contact lenses for her 7-year old daughter	250

Orthotics for herself 600

Braces for the 18-year old daughter 1800

11. Emma also had the following transactions in 2020:

Proceeds on the sale of a painting (ACB $950)	$2,100
Proceeds on the sale of a coin collection (ACB $2,000) Proceeds on the sale of BMX shares (ACB $7,260)	1,850 6,000
Interest income on a two-year GIC purchased on April 1, 2018, interest received on maturity (April 1, 2020).	10,000
Receipt from her mothers employer. This amount was in recognition of her mothers long service on her death.	12,000
Contribution to a federal political party	1,100

12. In 2020, Emma paid $350 a month for childcare and $3,000 in the year for hockey lessons for her 7-year old daughter. Her former spouse paid her $300 a month in child support pursuant to a written agreement upon their separation on January 01, 2020. In addition, Emmas former spouse also paid $500 per month in spousal support. Emma received $6,000 in total for child support and spousal support during the year.

13. Emma's 2019 income tax return indicates the following tax balances:

1. $5,000 of interest from the GIC noted in point 11 were reported.
2. Emmas 2019 earned income was $64,000 and her pension adjustment amount was

$4,500. She did not have any unused contribution room carry forward.

3. A non-capital loss carry forward of $18,000 from 2010 was available.
4. A net-capital loss carry forward resulting from 2007 in the amount of $20,000, and

$20,000 from 2017.

5. Charitable donations of $1,200 from 2019 were not deducted.
6. Capital gains reserve was $10,000 from 2019 (Capital gains reserve in 2020 is $5,000).

Required: Calculate Emmas 2020:

1. Total income
2. Net income
3. Taxable income