Question 4 (30 marks)

Mr. Ken North is 55 years old and lives in Kamloops, British Columbia. He works in the IT department of a large accounting firm.

Mr. Ken Norths Personal Information

1. Mr. Ken North was divorced and had custody of his 10-year-old son, Alex. In 2018, Alex had net income for tax purposes of $4,200. The $4,200 was comprised 100% of interest income, which was earned on bonds acquired from an inheritance. Alexs medical condition qualified Alex for the disability tax credit.

2. In 2018, Mr. Ken North installed access ramps in his home, to assist Alex in getting around. The access ramps cost $18,000.

3. Mr. Ken North, during 2018, volunteered 340 hours as a search and rescue volunteer. He received $480 in compensation for this work.

4. Mr. Ken Norths 77-year-old father, Donovan, lived with Mr. Ken North. Donovan provided care for Alex on a full-time basis. In 2018, Donovan had $11,000 net income for tax purposes.

5. Mr. Ken North incurred the following medical expenses in 2018:

   Prescription Drugs For Alex	$ 1,000
   Various Medical Treatments For Alex	5,000
   Plastic Surgery For Himself	7,000
   Dentist Fees For Donovan	2,000
   Total	$ 15,000

6. Mr. Ken North, during 2018, donated $8,000 to the United Way, a registered Canadian charity. He has made various donations to the United Way in prior years.

Employment Information

1. In 2018, Mr. Ken Norths salary was $175,000, none of which involved commissions. Federal income tax of $44,000 was withheld. Furthermore, he was awarded a year-end bonus of $25,000, payable in 2019.

2. Mr. Ken North and his employer each contributed $4,800 to a defined benefit registered pension plan.

3. Mr. Ken Norths employer offered to pay the tuition for employees taking language courses. Consequently, in 2018, Mr. Ken North enrolled in a German class. Mr. Ken Norths employer paid the $4,400 tuition fees for Mr. Ken Norths German course. The $4,400 amount was included in Mr. Ken Norths employment income as a taxable benefit, which was in addition to the $175,000 salary that Mr. Ken North received. The German course was for 11 months and the German course included 12 hours of classes per week. Mr. Ken North personally paid $545 for his own textbooks.

4. Mr. Ken North was provided with disability insurance by an employer sponsored plan. Commencing in 2014, Mr. Ken North contributed $450 per year to the plans coverage and his employer made matching contributions each year. As a result of an accident in 2018, Mr. Ken North was unable to work for 3 months, thus, he received $9,000 under this plan.

5. Mr. Ken Norths employer provided Mr. Ken North with an automobile. The automobile was acquired by the company several years ago at a total cost of $40,000. During 2018, the automobile was driven 60,000 kilometres, 55,000 of which were for employment related travel. Excluding the 3 months when Mr. Ken North was off work due to the accident, the automobile was available to Mr. Ken North throughout 2018. During the 3 months when Mr. Ken North was off work, the automobile was left at his employers parking lot. Mr. Ken North was required to pay his own operating costs, which were $8,400 in 2018.

6. Mr. Ken Norths employer provided all of its employees with financial counselling services. Mr. Ken Norths cost to the employer was $1,300.

7. Mr. Ken North received an $18,000 performance award in November 2018, which was in addition to the $175,000 salary.

8. On July 15, 2016, Mr. Ken North received options to acquire 500 of his employers stock [a public company] at a price of $25 per share. At that time, the shares were trading at $25 per share. Mr. Ken North exercised these options on September 12, 2018, when the shares were trading at $30 per share. Mr. Ken North was still holding these shares at December 31, 2018, since Mr. Ken North did not plan on selling the shares for several years.

9. In order to assist Mr. Ken North in acquiring a cottage in Kamloops, his employer gave him a five year, interest free loan of $200,000. The loan was granted on March 01, 2018 and, at this point in time, the interest rate on open five year mortgages was 5%. Assume the prescribed rate was 2% on this date and remained unchanged during the year. Mr. Ken North purchases a cottage for $300,000 on March 01, 2018.

10. During 2018, Mr. Ken North spent $14,400 on employment related meals and entertainment with clients of his employer. His employer reimbursed $10,000 of these costs.

11. During 2018, Mr. Ken North receives several gifts from his employer:

    • As a reward for winning the companys Employee Of The Month award, he received an expense paid weekend in a local hotel, which cost the company $2,200.

    • As was the case for all of the companys employees, Mr. Ken North received a $900 gift certificate for merchandise at a local department store.

    • At Christmas, the company gave each employee a basket of fancy chocolates, which cost the company $450.

Required

Calculate Mr. Ken Norths 2018 net income, taxable income, and federal income tax payable. Ignore GST and PST considerations.