QUESTION #2(37 MARKS)

Mrs. Mary Jonas formally separated from her husband in 2021. Custody of her four children, Len aged 18, Frank aged 13,Leslie aged 12 and Francine aged 11 and disabled was given to her as part of an agreement worked out with her husband in family court. To make a fresh start Mrs. Jonas she resigned her position with X Ltd. in Burlington, Ontario on March 1^st, 2021. She accepted a new position on May 1^st. 2021 in Montreal, Quebec.

Mrs. Jonas has always prepared her own tax return but because of the disruptions in her life in 2021, she was unable to complete her tax return . She has come to you for help in filing her 2021 tax return.

You met with Mrs. Jonas and she has provided you with the following details:-

i. Gross Salary from both companies.......................................$150,000

Payroll Deductions:-

Income Taxes...................................$42,000

Canada Pension Plan Contributions............................... 2,800

Employment Insurance Contributions................................ 900

Taxable benefits from the use of employers car............................9,600

Registered Pension Plan Contributions............................(5,100)

Donations to the United Way............................2,600

Additional Information:-

a. Relating to Miscellaneous In ome

i. Mrs. Jonas received a retiring allowance from her previous employer..$15,000

ii. Under the terms of her divorce settlement, Mrs. Jonas paid the following

amounts for the support of her husband:-

-$500 per month from August 1^st to December 31^st...............$2,500

-Rent for his new apartment($750 per month) from

August 1^st to December 31^st.................$3,750

b. Relating to Property Income

i. From her investments Mrs. Jonas had :-

Interest income from a GIC........................................$400

Accrued interest from bonds........................................$600

$0.25 cents per share from owing 2,500 shares in A Ltd., a CCPC

Dividends from a public corporation..................................$2,000

Dividends from Nestle, a Swedish company$2,340 ($660 was withheld for taxes in (Sweden).

She paid the following expenses:-

i. Investment counsellors fees...............................................$400

ii. Safety Deposit boxes................................................ 80

c. Relating to Capital Gains:-

At the time of the divorce settlement, the Jonases had owned a house in Burlington, a cottage in Haliburton, Ont. where the family spent their summers and a condominium in Florida in which they spent some time in the winters. The house which Mrs. Jonas sold at the time of the move to Montreal was not subject to the division of assets as this house was inherited from her parents and an agreement existed at the time of marriage that this property was not to be the subject of any division of assets in the event of a divorce.

The Family Court, when awarding the divorce settlement ordered that the cottage and the condominium be both sold and any capital gains be divided 50/50 to both parties.

Details relating to both these properties are as follows:-

Years Owned..Cost.Proceeds

Cottage...2017-2021$500,000.$1,100,000

Condo 2012-2021.$600,000.$1,500,000

d. Relating to 3 deductions-

i. Moving Expenses:-

-Airfare for five to move to Montreal $4,500

-Hotel and accommodation for 20 days in Montreal..$14,000

-Meals for 20 days..$6,000

-Moving van to transport belongings to Montreal$1,000

-Selling cost of former Burlington home..$13,000

-Purchase cost of new home in Montreal $8,000

ii. Child Care Expenses:-

-Payment to nanny $300 per week for 50 weeks while she worked

-$1,000 paid to Len(18 year old) to care for the children for 2 weeks in August when the nanny was on holidays

-$2,000 for Frank(aged 13) and Leslie(aged 12) to go to an overnight summer camp for four weeks

FORMULA((( CHILD CARE EXPENSES:

To be deducted by the person earning the lower income

The deduction is the least of:-

1. The amount of expenses paid
2. $5,000 for a child 7 years or older and $8,000 for a child under 7 and $11,000 for a child with a mental or physical impairment
3. 2/3 of Earned Income

Where the lower income spouse is impaired because of:-

1. Full-time post secondary education
2. Infirm and incapable for at least two weeks
3. Imprisoned for at least 2 weeks
4. Living apart from higher income spouse for at least 90 days in year then higher income spouse can deduct per week:-

a.$275 for each child with severe prolonged mental or physical impairment

b.$200 for child under 7

c.$125 for child over 7.

iii. In 2021 she made $9,000 contribution to her RRSP. Her earned income in 2020 for RRSP was $120,000 with a pension adjustment of $5,100 with unused deduction room of $15,000. In 2020 Mr. Jonas had withdrawn $6,000 from his RRSP. Mrs. Jonas had contributed $4,500 of the $6,000 to Mr. Jonas RRSP in 2020.

g. Mrs. Jonas has a net capital loss of $11,000 which is still available in 2021.

h. Mrs. Jonas paid the following expenses during the 2021 calendar year:-

Tuition fees for Len at the McMaster University$6,000

Medical expenses for Francine including costs of eyeglasses$8,000

Charitable donations to registered charities..$1,000

Contributions to the Conservative party of Ontario..$1,000

Required:- Compute Mrs. Jonas 2021 Federal Tax owing or owed following the ordering rules of S3 and Para 111(1(d)) of the ITA. Show all your supporting worksheets.