Tax Software Assignment Problem Eleven - 2 This problem is an expansion of the Chapter 4 problem. DISCLAIMER: All characters appearing in this problem are fictitious. Any resemblance to real persons, living or dead, is purely coincidental. George Pharmacy is a pharmaceutical sales rep who has been very successful at his job in the last few years. Unfortunately, his family life has not been very happy. Three years ago, his only child, Anna, was driving a car that was hit by a drunk driver. She and her husband were killed and their 14 year old son, Kevin, was blinded in the accident. He also suffered extensive injuries to his jaw that have required major and prolonged dental work, George and his wife, Valerie, adopted Kevin. Valerie quit her part time job to care for him. She also cares for her mother, Joan Drugstore, who lives with them. Joan suffers from dementia, Par kinson's, and severe depression. The family doctor has signed a letter stating that she is dependent on George and Valerie because of her impairments. Joan does not meet the residency require ments necessary to qualify for Canadian Old Age Security payments. Valerie's parents separated two years ago in Scotland after her father, David Drugstore, suffered enormous losses in the stock market. They were forced to sell their home and David moved to Chile. David phones periodically to request that money be deposited in his online bank account. George's brother, Martin, completed an alcohol rehabilitation program after being fired for drink- ing on the job. He is also living with George and Valerie while he is enrolled as a full time student at Western University. George is paying his tuition and Martin has agreed to transfer any avail- able education related amounts to George. Although Martin plans to file his 2019 tax return, he has not done so yet. Kevin is taking several undergraduate psychology courses at Western University. After hearing a talk given by an expert blind echolocator (one who uses sound to locate objects), his goal is to become a researcher at the Brain and Mind Institute and study the use of echolocation. Other information concerning George for 2019 is given on the following pages. Required: Prepare the 2019 income tax return of George Pharmacy using the Profile tax soft- ware program assuming Valerie does not file a tax return. List any assumptions you have made and any notes and tax planning issues you feel should be placed in the file. Ignore HST implica- tions in your solution by assuming that George does not qualify for the GST/HST rebate. Personal Information Title First Name Last Name SIN Date of birth (Y/M/D) Marital Status Canadian citizen? Provide information to Elections Canada? Own foreign property of more than $100,000 Canadian? Taxpayer Mr. George Pharmacy 527-000-509 1955-07-02 Married Yes Yes No Taxpayer's Address 123 ZZZ Street, London, Ontario NOZ OZO Phone number (519) 111-1111 Child Mother-In-Law Family Members First Name Last Name SIN Date of birth (Y/M/D) Net income Spouse Valerie Pharmacy 527-000-483 1954-12-30 $6,520 in CPP Kevin Pharmacy 527-000-517 2003-10-17 Nil Joan Drugstore None 1934-02-24 $500 Brother Family Members First Name Last Name SIN Date of birth (Y/M/D) Net income Father-In-Law David Drugstore None 1935-01-12 Nil Martin Pharmacy 527-000-533 1972-06-02 $8,300 During September, David was arrested in Chile. Valerie had to spend three weeks in Chile and pay $2,000 in bribes before she could get him released from jail. George had to pay Nannies On Call $3,500 for in-home help to take care of Kevin while she was gone. Chapter 11 Tax Software Assignment Problems Box Amount A 8,000 0 B T2202A - (Martin) Tuition fees - for Martin Pharmacy (brother) Number of months in school - part time Number of months in school - full time C 8 Box Amount A 3,600 8 B T2202A - (Kevin) Tuition fees - for Kevin Number of months in school - part time Number of months in school - full time 0 Am't Donor Charitable Donation Receipts Mothers Against Drunk Drivers (MADD) Canadian Institute For The Blind (CNIB) 1,000 3,000 Valerie George Box Amount T4 14 16 18 Issuer - Mega Pharma Inc. Employment income Employee's CPP contributions Employee's El premiums Income tax deducted Employment commissions Charitable donations 378,000.00 2,748.90 860.22 114,000.00 82,000.00 400.00 22 42 46 During 2019, Mega reimbursed George $3,788 for meals and entertainment with clients, $2,268 for hotels and $4,925 for airline tickets. In addition to George's salary, he also earns commissions. His employer requires him to have an office in his home and has signed the form T2200 each year to this effect. During 2019, George purchased a new computer and software that will be used solely in his home office for employment-related uses. The computer cost $3,600 and the various software programs cost $1,250. House Costs Area of home used for home office (square feet) Total area of home (square feet) Telephone line including high speed internet connection Hydro Insurance - House Maintenance and repairs Mortgage interest Mortgage life insurance premiums Property taxes 650 5,000 620 3,200 4,000 3,800 6,200 400 6,700 Tax Software Assignment Problems (Y/M/D) Patient Am't 731.00 2019-12-31 2019-08-31 2019-09-19 2019-11-07 2019-06-07 2019-03-22 George George George Valerie Joan Medical Expenses Johnson Inc. Dr. Smith Optician Pharmacy Dr. Wong Tropical Disease Centre Dr. Walker Dr. Takarabe Description Out of Canada insurance Dental fees Prescription glasses Prescription Psychiatric counseling Prescription Group therapy Orthodontics and Dental David 155.40 109.00 66.84 2.050.00 390.00 6,000.00 30,000.00 2019-12-20 Martin 2019-10-01 Kevin George paid $800 for the care and feeding of Kevin's seeing eye dog, Isis, during 2019. At the beginning of 2019, George had a net capital loss carry forward of $10,500 from the sale of shares in 2018. He had not disposed of any capital assets prior to 2018. Asset 1 Asset 2 Asset 3 Molson Inc. shares 150 Asset Dispositions Description Number of units Year of acquisition Date of disposition Proceeds of disposition Adjusted cost base Outlays and expenses 2016 February 14 37000 27,600 35 Imperial Oil shares 387 2017 June 6 9.000 12.100 29 Sailboat NA 2017 October 1 74.000 72.000 NA Asset 5 Asset 6 Asset Dispositions Description Year of acquisition Date of disposition Proceeds of disposition Adjusted cost base Outlays and expenses Asset 4 Motorcycle 2019 November 17 14.000 21.000 NA Painting 2012 August 28 Coin collection 2016 March 24 700 1.800 NA NA Amount Real Estate Rental - Commercial Property Address - 888 YYZ Drive, Toronto, Ontario MOM OMO Year of purchase Gross rents Property taxes Insurance Interest on mortgage Payment on principal Furnace repairs Maintenance contract Building purchased for $120,100 - UCC beginning of year Fixtures purchased for $8,500 - UCC beginning of year 2015 16.000 5,128 1.890 3.175 2.200 550 3,469 107441 4.651 The building and fixtures were purchased on August 28, 2015. At the time the building and fin tures were being used as a drugstore and Mr. Pharmacy has retained the same tenant George knows he should have been contributing to various savings plans over the years, but his increasing number of needy dependants required he spend all of his take home pay to support them and he has contributed to none. It was only in 2019 that his compensation had increased enough so that he had sufficient funds to consider savings plans. His daughter had made contributions totaling more than $10,000 to an RESP for Kevin prior to her death, but George has made no RESP contributions to the plan since then. George's 2019 RRSP deduction limit is $285,550. Tax Software Assignment Problem Eleven - 2 This problem is an expansion of the Chapter 4 problem. DISCLAIMER: All characters appearing in this problem are fictitious. Any resemblance to real persons, living or dead, is purely coincidental. George Pharmacy is a pharmaceutical sales rep who has been very successful at his job in the last few years. Unfortunately, his family life has not been very happy. Three years ago, his only child, Anna, was driving a car that was hit by a drunk driver. She and her husband were killed and their 14 year old son, Kevin, was blinded in the accident. He also suffered extensive injuries to his jaw that have required major and prolonged dental work, George and his wife, Valerie, adopted Kevin. Valerie quit her part time job to care for him. She also cares for her mother, Joan Drugstore, who lives with them. Joan suffers from dementia, Par kinson's, and severe depression. The family doctor has signed a letter stating that she is dependent on George and Valerie because of her impairments. Joan does not meet the residency require ments necessary to qualify for Canadian Old Age Security payments. Valerie's parents separated two years ago in Scotland after her father, David Drugstore, suffered enormous losses in the stock market. They were forced to sell their home and David moved to Chile. David phones periodically to request that money be deposited in his online bank account. George's brother, Martin, completed an alcohol rehabilitation program after being fired for drink- ing on the job. He is also living with George and Valerie while he is enrolled as a full time student at Western University. George is paying his tuition and Martin has agreed to transfer any avail- able education related amounts to George. Although Martin plans to file his 2019 tax return, he has not done so yet. Kevin is taking several undergraduate psychology courses at Western University. After hearing a talk given by an expert blind echolocator (one who uses sound to locate objects), his goal is to become a researcher at the Brain and Mind Institute and study the use of echolocation. Other information concerning George for 2019 is given on the following pages. Required: Prepare the 2019 income tax return of George Pharmacy using the Profile tax soft- ware program assuming Valerie does not file a tax return. List any assumptions you have made and any notes and tax planning issues you feel should be placed in the file. Ignore HST implica- tions in your solution by assuming that George does not qualify for the GST/HST rebate. Personal Information Title First Name Last Name SIN Date of birth (Y/M/D) Marital Status Canadian citizen? Provide information to Elections Canada? Own foreign property of more than $100,000 Canadian? Taxpayer Mr. George Pharmacy 527-000-509 1955-07-02 Married Yes Yes No Taxpayer's Address 123 ZZZ Street, London, Ontario NOZ OZO Phone number (519) 111-1111 Child Mother-In-Law Family Members First Name Last Name SIN Date of birth (Y/M/D) Net income Spouse Valerie Pharmacy 527-000-483 1954-12-30 $6,520 in CPP Kevin Pharmacy 527-000-517 2003-10-17 Nil Joan Drugstore None 1934-02-24 $500 Brother Family Members First Name Last Name SIN Date of birth (Y/M/D) Net income Father-In-Law David Drugstore None 1935-01-12 Nil Martin Pharmacy 527-000-533 1972-06-02 $8,300 During September, David was arrested in Chile. Valerie had to spend three weeks in Chile and pay $2,000 in bribes before she could get him released from jail. George had to pay Nannies On Call $3,500 for in-home help to take care of Kevin while she was gone. Chapter 11 Tax Software Assignment Problems Box Amount A 8,000 0 B T2202A - (Martin) Tuition fees - for Martin Pharmacy (brother) Number of months in school - part time Number of months in school - full time C 8 Box Amount A 3,600 8 B T2202A - (Kevin) Tuition fees - for Kevin Number of months in school - part time Number of months in school - full time 0 Am't Donor Charitable Donation Receipts Mothers Against Drunk Drivers (MADD) Canadian Institute For The Blind (CNIB) 1,000 3,000 Valerie George Box Amount T4 14 16 18 Issuer - Mega Pharma Inc. Employment income Employee's CPP contributions Employee's El premiums Income tax deducted Employment commissions Charitable donations 378,000.00 2,748.90 860.22 114,000.00 82,000.00 400.00 22 42 46 During 2019, Mega reimbursed George $3,788 for meals and entertainment with clients, $2,268 for hotels and $4,925 for airline tickets. In addition to George's salary, he also earns commissions. His employer requires him to have an office in his home and has signed the form T2200 each year to this effect. During 2019, George purchased a new computer and software that will be used solely in his home office for employment-related uses. The computer cost $3,600 and the various software programs cost $1,250. House Costs Area of home used for home office (square feet) Total area of home (square feet) Telephone line including high speed internet connection Hydro Insurance - House Maintenance and repairs Mortgage interest Mortgage life insurance premiums Property taxes 650 5,000 620 3,200 4,000 3,800 6,200 400 6,700 Tax Software Assignment Problems (Y/M/D) Patient Am't 731.00 2019-12-31 2019-08-31 2019-09-19 2019-11-07 2019-06-07 2019-03-22 George George George Valerie Joan Medical Expenses Johnson Inc. Dr. Smith Optician Pharmacy Dr. Wong Tropical Disease Centre Dr. Walker Dr. Takarabe Description Out of Canada insurance Dental fees Prescription glasses Prescription Psychiatric counseling Prescription Group therapy Orthodontics and Dental David 155.40 109.00 66.84 2.050.00 390.00 6,000.00 30,000.00 2019-12-20 Martin 2019-10-01 Kevin George paid $800 for the care and feeding of Kevin's seeing eye dog, Isis, during 2019. At the beginning of 2019, George had a net capital loss carry forward of $10,500 from the sale of shares in 2018. He had not disposed of any capital assets prior to 2018. Asset 1 Asset 2 Asset 3 Molson Inc. shares 150 Asset Dispositions Description Number of units Year of acquisition Date of disposition Proceeds of disposition Adjusted cost base Outlays and expenses 2016 February 14 37000 27,600 35 Imperial Oil shares 387 2017 June 6 9.000 12.100 29 Sailboat NA 2017 October 1 74.000 72.000 NA Asset 5 Asset 6 Asset Dispositions Description Year of acquisition Date of disposition Proceeds of disposition Adjusted cost base Outlays and expenses Asset 4 Motorcycle 2019 November 17 14.000 21.000 NA Painting 2012 August 28 Coin collection 2016 March 24 700 1.800 NA NA Amount Real Estate Rental - Commercial Property Address - 888 YYZ Drive, Toronto, Ontario MOM OMO Year of purchase Gross rents Property taxes Insurance Interest on mortgage Payment on principal Furnace repairs Maintenance contract Building purchased for $120,100 - UCC beginning of year Fixtures purchased for $8,500 - UCC beginning of year 2015 16.000 5,128 1.890 3.175 2.200 550 3,469 107441 4.651 The building and fixtures were purchased on August 28, 2015. At the time the building and fin tures were being used as a drugstore and Mr. Pharmacy has retained the same tenant George knows he should have been contributing to various savings plans over the years, but his increasing number of needy dependants required he spend all of his take home pay to support them and he has contributed to none. It was only in 2019 that his compensation had increased enough so that he had sufficient funds to consider savings plans. His daughter had made contributions totaling more than $10,000 to an RESP for Kevin prior to her death, but George has made no RESP contributions to the plan since then. George's 2019 RRSP deduction limit is $285,550