Question1

Dr. Sue Chen has hired your professional services to file her income tax return. Dr. Chen is a retired surgeon. Due to her failing eyesight, Sue was required to retire from her occupation at a younger age than normal. Fortunately, Sue has more than enough income to support herself because of years of receiving a very large salary as a surgeon and a family inheritance. Sue has invested most of her past employment earnings into a large portfolio which paid the following amounts during 2020, the current year.

Item	Amount
Dividends from public Canadian corporations (subject to high corporate tax rates):	$24,000
Dividends from private Canadian corporations (subject to low corporate tax rates):	32,500
Interest income received from Canadian sources:	17,800
Dividends from foreign corporations (translated into Canadian dollars):	12,900

Part 1 of the additional information

Note: Total foreign dividends earned was $14,300 less foreign tax withheld of $1,400. Sues

portfolio of investments includes a five-year investment contract purchased three years ago on September 1. The investment contract has a maturity value of $160,000 and an annual interest rate of 3%. The total interest earned on the investment contract will be paid on maturity on September 1,

2022, two years from now. Sue did not receive any interest (cash) from this investment contract in 2020.

Sue's portfolio of investments is managed by a large Canadian brokerage firm called Premier Investments Inc. ("Premier") Premier charges Sue investment counsel fees of $5,400 during 2020.

Part 2 of the additional information.

In 2019, the previous year, Sue received a large family inheritance, which she invested into a rental property. The property was purchased in 2019, and Sue has claimed the maximum amount of capital cost allowance (CCA) on the property in 2019. In 2020, the opening UCC balance in CCA Class 1 for the rental building is $345,000 and Sue would like to claim the maximum CCA deduction on the rental income in 2020. The rental income and expense information for 2020 is as follows.

Item	Amount
Rental income:	$2,500 per month
Property tax:	5,200 for the year
Property insurance:	150 per month
Property management fees:	190 per month
Utilities:	620 per month
Repair of a leaky faucet and water damage:	1,350

To assist with filing her tax return, Sue provides you with detailed records from her bank. The documents indicate that Sue has borrowed the following amounts from her bank.

	$190,000 mortgage on the rental property with principal repayments totalling $14,500and interest payments of $6,700for 2020
	$385,000 mortgage on Dr. Chen's personal home with principal repayments totalling $16,500 and interest payments of $7,800 for 2020
	$170,000 loan used to purchase mutual funds with Premier Investments Inc. Sue paid interest of $4,900 on this loan during 2020.
	$47,500 loan used to purchase Sue's personal use vehicle. Sue paid $2,330 of interest on this loan during 2020.

Requirement

1.	Compute Dr. Bauer's net property income for 2020.
2.	Jayden has reviewed your calculation of net property income and she is confused. Jayden does not understand why the dividend income included in your calculation is different than the amounts she received in the year. Describe for Jayden the concept of integration and how this impacts the taxation of Canadian source dividends as well as the tax consequences of foreign source dividends received by an individual in Canada.
3.	Jayden informs you that she plans on selling her rental property soon and using a portion of the proceeds from the sale to pay off some of her debt with the bank. Jayden would like your advice on which loans she should pay back first to achieve the most favourable tax consequences.
4.	Prior to selling the rental property, Jayden plans on upgrading the wood siding on the house to vinyl siding. Explain to Jayden the difference between capitalizing and expensing costs and indicate which treatment the siding cost should receive.
5.	Explain to Jayden the tax consequences that could occur if she sells the rental property because she has claimed the maximum CCA on the rental property since acquisition.

Requirement 1. Compute Dr.

Bauer's net property income for 2020.

Fill in the table below to compute the net property income. (Round amounts to the nearest cent. Enter deductions with parentheses or a minus sign.)

Property Income	Amount
Eligible dividends
Ineligible dividends
Interest income
Foreign dividends
Net rental income
Carrying Charges
Net property income