Question B: Patrick Egbunonu (Taxpayer)

In order to supplement his income working in a Kingston bookstore, Mr. Patrick Egbunonu has decided to start a home-based business that will specialize in selling used textbooks to university and college students.

The business will be run out of space that he has set aside in his residence. This space involves 18 percent of the total floor space in the residence.

The residence was acquired on January 1, 2020 at a total cost of $426,000. It is estimated that $150,000 of this total value can be attributed to the land on which the residence is situated. For the year ending December 31, 2020, Mr. Egbunonu has the following costs that can be associated with this residence:

Utilities for Home (Heat, Light, and Water) $ 3,200

Mortgage Interest Paid 10,100

House Insurance 500

Property Taxes 4,300

Repairs and Maintenance for Home 2,600

Total $20,700

The business begins operations on January 31, 2020. On that date, Mr. Egbunonu acquires the following assets to be used in his new business:

Office Furniture and Storage Racks $18,500

Computer 1,430

Business Software 570

In addition, he has a separate telephone line installed for dealing exclusively with the mail order business. The telephone charge includes charges for a toll-free number and a long-distance package.

During the period January 31, 2020 through December 31, 2020, his mail order sales total $182,000. Costs associated with these sales are as follows:

Cost of Merchandise Sold $98,000

Unsold Merchandise (Lower of Cost and Market) 23,500

Packaging Materials 2,400

Shipping Costs 4,600

Miscellaneous Office Supplies 560

Telephone (Total Charge for the Period) 1,100

Printing of Posters and Brochures Distributed 420

Required:

Prepare a statement of income and CCA schedule for Mr. Egbunonu to include with his 2020 personal income tax return.