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D Emmy Peterson, a single taxpayer, was able to complete her own taxes prior to 2021. In 2020 she earned employment ncome, had a business loss from a partnership and contributed to her RRSP. This year, however, she requires assistance due co the following life changes and transactions. Income sources and amounts for 2021 are shown below. income Sources Net Employment Income RPP Contribution Net Business Income (Loss) interest income Amount 103,037 10,697 (23,639) 1,880 he is unable to find her 2020 notice of assessment with her 2021 RRSP deduction limit, however, she has provided what mformation she can in note 1. he adopted an 8 year-old child from the Ukraine and obtained custody on February 1, 2021. She hired a nanny for two months to help the child, Andi, get settled before she began school. The neighbour babysits when Emmy has to work a few ours on the weekend. Andi took hip hop dance lessons at J'dore Dance for eight weeks and attended overnight summer amp for two weeks. Costs paid in the year are outlined in note 2. FMV at time of inheritance Proceeds She sold two parcels of land she had inherited from her grandmother in 2020. The fair market value at the time of inheritance and the proceeds are outlined below. She entered into a financing arrangement with the buyer of parcel B to receive a 30% down payment in the year of sale, 30% in the year following the sale and the remaining 40% the year thereafter. Templates to calculate gains and losses are provided in note 3. Parcel A 94,626 60,989 Parcel B 834,499 960,787 She was requested to relocate by her employer and agreed, thinking moving to a smaller center may be better to raise a child. For this reason she agreed to relocate from Toronto to Sarnia. She owned the home she sold in Toronto for nine years. She would like to utilize the principal residence exemption for this transaction. During the 9 years she also owned a condo for four years and used the principal residence to fully exempt the gain. Costs associated with the move, and sale of her residence are contained in note 4. Emmy will use the simplified method of determining vehicle and food costs in calculating her moving expenses. Assume that the relevant flat rate for vehicle expenses is $0.53 for Ontario, and the flat rate for meals is $51 per person per day. H Required: Complete Emmy's net income for tax calculation, showing all of your work in the templates provided. Income under ITA 3(a) Net Employment Income Interest income Income under ITA 3(b) Taxable Capital Gains Allowable Capital Losses Subtotal 3(a) + 3(b) Deductions under ITA 3(c) Childcare Expenses Moving Expenses RRSP Deduction Subtotal 3(c) Deduction under ITA 3(d) Net Business Income (Loss) Net Income for tax purposes Income Sources 2020 unused deduction limit 2020 pension adjustment 2020 earned income for RRSP Undeducted contributions from prior years RRSP Contribution H Required: Complete all of the templates, inputting your figures into the blue boxes. Where there is an impact to Emmy's net income, include/deduct this amount above. Note 1: RRSP Deduction Unused deduction room (2020) +18% of prior year earned income or $27,830 Less Pension Adjustment 2021 RRSP Deduction Limit Amount 103,037 1,880 58,964 27,148 108,232 13,576 21,033 (23,639) Income Sources 2020 unused deduction limit 2020 pension adjustment 2020 earned income for RRSP Undeducted contributions from prior years RRSP Contribution WE Unused deduction room (2020) +18% of prior year earned income or $27,830 Less Pension Adjustment 2021 RRSP Deduction Limit RRSP Deduction is the lesser of: 2021 RRSP Deduction Limit Contributions Amount 58,964 27,148 108,232 13,576 -21,033 63 Note 2: Child Care Expenses 64 Lesser of the following: 1. Actual amounts - Enter amount allowed in column C (enter zero if not allowed, or amount allowed if not fully allowed in column C) 65 66 Nanny (February and March 2021) 67 Before and after school care 68 Baby-sitter (16 year old neighbour) Hip Hop dance lessons 69 70 Overnight summer camp 71 Total Actual Amount 72 2.2/3 x earned income 73 74 75 Total Earned Income 76 77 78 3. Annual limits 79 80 81 82 83 Child Care Expense Deduction 2,761 992 356 x 2/3 1,053 554 86 Note 3: Capital Gains (Losses) 87 88 Parcel A & B 89 90 91 Proceeds 92 Less ACB+ selling costs 93 Capital gain (loss) 94 95 96 97 98 Proceeds 99 Less ACB + selling costs 100 Capital gain 101 Less capital gains reserve x 50%= Taxable capital gain (loss) Parcel A-Taxable capital gain (loss) Parcel B- Taxable capital gain (loss) 102= Capital Gain 103 x 50%= Taxable Capital Gain 104 105 Capital gains reserves formula for parcel B: 106 60,989 99 Less ACB+ selling costs 100 Capital gain 101 Less capital gains reserve 102 Capital Gain 103 x 50%-Taxable Capital Gain 104 105 Capital gains reserves formula for parcel B: 106 107 Formula 1: 108 109 110 111 112 113 114 115 Formula 2: 116 117 118 Proceeds payable after year-end Total Proceeds Capital Gain 119 Principal Residence 120 x Capital gain = x 20% Capital gains reserve (4-# of preceding taxation years ending = Capital gains reserve after the disposition) 115 Formula 2: 16 17 18 19 Principal Residence 20 21 22 Proceeds 23 Less ACB+ selling costs Capital Gain 24 Capital gain 15 Less principal residence exemption 16 Revised Capital Gain 7 x 50%= Taxable Capital Gain 8 9 Principal residence 0 Exempt portion of capital gain 2 Principal residence exemption 122 136 Exempt portion of capital gain = 144 Cost Of Cleaning And Minor Repairs Prior To Sale 145 Moving Company fee 146 Legal Fees-Sarnia Property 147 Land Transfer Tax-Sarnia Property 148 Hotel in Toronto (10 Nights) Taxable capital gain 137 Note 4: Moving Expenses Deduction and sale of residence 138 139 Proceeds- Toronto Property 140 Adjusted cost base - Toronto Property 141 Employment Income from Sarnia office 142 Legal Fees- Toronto Property 143 Real Estate Commissions 149 Food in Toronto (10 Days) 150 Gas For Trip (1 day-290km to Sarnia) 153 Food in Sarnia (7 days) 154 Total moving expenses 155 151 Food traveling to Sarnia 152 Hotel in Sarnia (7 Nights) x 20% = Capital gain x 807,268 641,751 58,657 4,036 24,218 1,615 5,534 2,422 2,180 2,130 400 149 33 2,345 273 (4-# of preceding taxation years ending Capital gains reserve after the disposition) 1+ # of years designated Number of years owned See Note 5 Note 5: Enter amount of moving expense allowed in column C. If zero, leave blank. If full amount not allowed enter 156 amount allowed, showing your work in column D. + Emmy has reviewed your calculation of net income for tax purposes and has the following questions. 1. Since this is Emmy's first year claiming the childcare expense deduction is wondering if you can explain the amount of deducted. (3 marks) 2. Emmy thought the capital gain on the sale of the parcel B land was a lot larger then what was included in income. She is wondering if you can explain why the entire capital gain was not included in income? (3 marks) 3. Emmy is curious as to how you determined the number of years she designated her Toronto home, and why the capital gain isn't fully exempt like her condo was. (3 marks) 4. Emmy is wondering if you made changes to the list of moving expenses she provided? She is wondering if you can explain these to her. (3 marks) D Emmy Peterson, a single taxpayer, was able to complete her own taxes prior to 2021. In 2020 she earned employment ncome, had a business loss from a partnership and contributed to her RRSP. This year, however, she requires assistance due co the following life changes and transactions. Income sources and amounts for 2021 are shown below. income Sources Net Employment Income RPP Contribution Net Business Income (Loss) interest income Amount 103,037 10,697 (23,639) 1,880 he is unable to find her 2020 notice of assessment with her 2021 RRSP deduction limit, however, she has provided what mformation she can in note 1. he adopted an 8 year-old child from the Ukraine and obtained custody on February 1, 2021. She hired a nanny for two months to help the child, Andi, get settled before she began school. The neighbour babysits when Emmy has to work a few ours on the weekend. Andi took hip hop dance lessons at J'dore Dance for eight weeks and attended overnight summer amp for two weeks. Costs paid in the year are outlined in note 2. FMV at time of inheritance Proceeds She sold two parcels of land she had inherited from her grandmother in 2020. The fair market value at the time of inheritance and the proceeds are outlined below. She entered into a financing arrangement with the buyer of parcel B to receive a 30% down payment in the year of sale, 30% in the year following the sale and the remaining 40% the year thereafter. Templates to calculate gains and losses are provided in note 3. Parcel A 94,626 60,989 Parcel B 834,499 960,787 She was requested to relocate by her employer and agreed, thinking moving to a smaller center may be better to raise a child. For this reason she agreed to relocate from Toronto to Sarnia. She owned the home she sold in Toronto for nine years. She would like to utilize the principal residence exemption for this transaction. During the 9 years she also owned a condo for four years and used the principal residence to fully exempt the gain. Costs associated with the move, and sale of her residence are contained in note 4. Emmy will use the simplified method of determining vehicle and food costs in calculating her moving expenses. Assume that the relevant flat rate for vehicle expenses is $0.53 for Ontario, and the flat rate for meals is $51 per person per day. H Required: Complete Emmy's net income for tax calculation, showing all of your work in the templates provided. Income under ITA 3(a) Net Employment Income Interest income Income under ITA 3(b) Taxable Capital Gains Allowable Capital Losses Subtotal 3(a) + 3(b) Deductions under ITA 3(c) Childcare Expenses Moving Expenses RRSP Deduction Subtotal 3(c) Deduction under ITA 3(d) Net Business Income (Loss) Net Income for tax purposes Income Sources 2020 unused deduction limit 2020 pension adjustment 2020 earned income for RRSP Undeducted contributions from prior years RRSP Contribution H Required: Complete all of the templates, inputting your figures into the blue boxes. Where there is an impact to Emmy's net income, include/deduct this amount above. Note 1: RRSP Deduction Unused deduction room (2020) +18% of prior year earned income or $27,830 Less Pension Adjustment 2021 RRSP Deduction Limit Amount 103,037 1,880 58,964 27,148 108,232 13,576 21,033 (23,639) Income Sources 2020 unused deduction limit 2020 pension adjustment 2020 earned income for RRSP Undeducted contributions from prior years RRSP Contribution WE Unused deduction room (2020) +18% of prior year earned income or $27,830 Less Pension Adjustment 2021 RRSP Deduction Limit RRSP Deduction is the lesser of: 2021 RRSP Deduction Limit Contributions Amount 58,964 27,148 108,232 13,576 -21,033 63 Note 2: Child Care Expenses 64 Lesser of the following: 1. Actual amounts - Enter amount allowed in column C (enter zero if not allowed, or amount allowed if not fully allowed in column C) 65 66 Nanny (February and March 2021) 67 Before and after school care 68 Baby-sitter (16 year old neighbour) Hip Hop dance lessons 69 70 Overnight summer camp 71 Total Actual Amount 72 2.2/3 x earned income 73 74 75 Total Earned Income 76 77 78 3. Annual limits 79 80 81 82 83 Child Care Expense Deduction 2,761 992 356 x 2/3 1,053 554 86 Note 3: Capital Gains (Losses) 87 88 Parcel A & B 89 90 91 Proceeds 92 Less ACB+ selling costs 93 Capital gain (loss) 94 95 96 97 98 Proceeds 99 Less ACB + selling costs 100 Capital gain 101 Less capital gains reserve x 50%= Taxable capital gain (loss) Parcel A-Taxable capital gain (loss) Parcel B- Taxable capital gain (loss) 102= Capital Gain 103 x 50%= Taxable Capital Gain 104 105 Capital gains reserves formula for parcel B: 106 60,989 99 Less ACB+ selling costs 100 Capital gain 101 Less capital gains reserve 102 Capital Gain 103 x 50%-Taxable Capital Gain 104 105 Capital gains reserves formula for parcel B: 106 107 Formula 1: 108 109 110 111 112 113 114 115 Formula 2: 116 117 118 Proceeds payable after year-end Total Proceeds Capital Gain 119 Principal Residence 120 x Capital gain = x 20% Capital gains reserve (4-# of preceding taxation years ending = Capital gains reserve after the disposition) 115 Formula 2: 16 17 18 19 Principal Residence 20 21 22 Proceeds 23 Less ACB+ selling costs Capital Gain 24 Capital gain 15 Less principal residence exemption 16 Revised Capital Gain 7 x 50%= Taxable Capital Gain 8 9 Principal residence 0 Exempt portion of capital gain 2 Principal residence exemption 122 136 Exempt portion of capital gain = 144 Cost Of Cleaning And Minor Repairs Prior To Sale 145 Moving Company fee 146 Legal Fees-Sarnia Property 147 Land Transfer Tax-Sarnia Property 148 Hotel in Toronto (10 Nights) Taxable capital gain 137 Note 4: Moving Expenses Deduction and sale of residence 138 139 Proceeds- Toronto Property 140 Adjusted cost base - Toronto Property 141 Employment Income from Sarnia office 142 Legal Fees- Toronto Property 143 Real Estate Commissions 149 Food in Toronto (10 Days) 150 Gas For Trip (1 day-290km to Sarnia) 153 Food in Sarnia (7 days) 154 Total moving expenses 155 151 Food traveling to Sarnia 152 Hotel in Sarnia (7 Nights) x 20% = Capital gain x 807,268 641,751 58,657 4,036 24,218 1,615 5,534 2,422 2,180 2,130 400 149 33 2,345 273 (4-# of preceding taxation years ending Capital gains reserve after the disposition) 1+ # of years designated Number of years owned See Note 5 Note 5: Enter amount of moving expense allowed in column C. If zero, leave blank. If full amount not allowed enter 156 amount allowed, showing your work in column D. + Emmy has reviewed your calculation of net income for tax purposes and has the following questions. 1. Since this is Emmy's first year claiming the childcare expense deduction is wondering if you can explain the amount of deducted. (3 marks) 2. Emmy thought the capital gain on the sale of the parcel B land was a lot larger then what was included in income. She is wondering if you can explain why the entire capital gain was not included in income? (3 marks) 3. Emmy is curious as to how you determined the number of years she designated her Toronto home, and why the capital gain isn't fully exempt like her condo was. (3 marks) 4. Emmy is wondering if you made changes to the list of moving expenses she provided? She is wondering if you can explain these to her
