Tax Software AP 4-1

DISCLAIMER: All characters appearing in this problem are fictitious. Any resemblance to

real persons, living or dead, is purely coincidental.

Mr. Buddy Musician (SIN 527-000-061) was born in Vancouver on August 28, 1954. He has spent most of his working life as a pianist and song writer. He and his family live at 111 WWW Street, Vancouver, B.C. V4H 3W4, phone (604) 111-1111.

Mr. Musician's wife, Natasha (SIN 527-000-129), was born on June 6, 1996. She and Mr. Musician have six children: four biological and two adopted. Each biological child was born on April 1 of the following years: Linda, 2016; Larry, 2017; Donna, 2018; and Donald, 2019. None of these children have any income of their own for 2021. Natasha's only income in 2021 is $3,200 from singing engagements.

Buddy and Natasha's son Richard (SIN 527-000-285) was born on March 15, 2004 and has net income of $2,800 for the year. Due to his accelerated schooling, he started full-time attendance at university in September of 2021 at the age of 17. His first semester tuition fee is $3,000. These amounts are paid by Mr. Musician.

Their other child, Sarah, was born on September 2, 2001, and was in full-time attendance at university for all of 2021 (including a four-month summer session). Her tuition is $9,600. These amounts are also paid by Mr. Musician. Sarah has no income during the year. Neither Richard nor Sarah will have any income in the next three years. They both have agreed that the maximum tuition amount should be transferred to their father if it is beneficial.

Mr. Musician's mother, Eunice, was born on April 10, 1934, and his father, Earl, was born on November 16, 1932. They both live with Mr. Musician and his wife. While his father has some mobility issues, he is not inform. His mother is legally blind. Eunice Musician had net income of $9,500 for the year, while Earl Musician had net income of $7,500.

Other information concerning Mr. Musician and his family for 2021 is as follows:

1. Mr. Musician earned $16,500 for work as the house pianist at the Loose Moose Pub. His T4 showed that his employer withheld $500 for income taxes and $280.70 for EI. No CPP was withheld as he had previously fled an election to stop contributing to the CPP on January 2, 2020.

2. During the year, Mr. Musician made his annual $3,000 donation to Planned Parenthood of Canada, a registered Canadian charity.

3. Mr. Musician has been married before to Lori Musician (SIN 527-000-319). Lori is 52 years old and lives in Fort Erie, Ontario.

4. Mr. Musician has two additional children who live with their mother, Ms. Dolly Nurse (SIN 527-000-582), in Burnaby, British Columbia. The children are Megan Nurse, aged 12, and Andrew Nurse, aged 14. Neither child has any income in 2021. While Ms. Nurse and Mr. Musician were never married, Mr. Musician acknowledges that he is the father of both children. Although he has provided limited financial aid by paying their dental and medical expenses, the children are not dependent on Mr. Musician for support.

5. Mr. Musician wishes to claim all his medical expenses on a calendar-year basis instead of a random twelve-month period. On December 2, 2022, Mr. Musician paid dental expenses to Canada Wide Dental Clinics for the following individuals:

Himself $1,200

Natasha (wife) 700

Richard (adopted son) 800

Sarah (adopted daughter) 300

Linda (daughter) 100

Earl (father) 1,050

Lori (ex-wife) 300

Dolly Nurse (mother of two of his children) 675

Megan Nurse (daughter of Dolly Nurse) 550

Total $5,675

6. Mr. Musician signed a contract with Fred Nesbitt on January 13, 2021, to do permanent modifications to his house. The contract was for the installation of ramps with sturdy hand railings outside his front and back doors to give his parents easier access to the house and modifications to their bathroom so they would be less likely to fall when using the shower. The contract price was $5,800. As neither of his parents has a severe and prolonged mobility impairment, these expenditures are not eligible medical expenses.

7. Mr. Musician paid four quarterly instalments of $1,000 each (total of $4,000) for 2021, as requested on his instalment reminders from the CRA. He paid each instalment on the due date.

8. Assume that Mr. Musician has not applied to receive either OAS or CPP benefits.

Required:With the objective of minimizing Mr. Musician's income tax payable, prepare Mr. Musician's 2021 income tax return using the Profile tax software program assuming Natasha does not file an income tax return. List any assumptions you have made and any notes and tax planning issues you feel should be placed in the file