Taxable Income and Tax Payable for Individuals Revisited

Tax Software Assignment Problems

$13.$ Mr$.$ Musician is required by a court order to pay spousal support of $$400$ per month to his

former spouse, Lori Musician. Mr$.$ Musician made spousal support payments of S$4,800$ in

$2022$

$14.$ Mr$.$ Musician is required by a court order to make child support payments of S$350$ per month

to Dolly Nurse for his two children, Megan and Andrevw Nurse. A total of S$4,200$ was paid in

$2022$

$15.$ Mr$.$ Musician made contributions to the federal Liberal Party, a registered Canadian political

party, in the amount of $$610$ during the year.

$16.$ Mr$.$ Musician made a $$5,000$ contribution to his TFSA during the year. Thanks to the excellent

investing advice of his gardener, the balance in his TFSA account has grown to more than

$$175,000$ by the end of the year.

$17.$ Mr$.$ Musician agrees to provide information with respect to Elections Canada, In addition Mr$.$

Musician did not own foreign property in excess of $$100,000$ Canadian at any time in the

year, did not own an interest ina foreign affiliate at any time in the year and did not dispose

of a principal residence at any time in the year.

$18.$ Mr$.$ Musician's unused RRSP deduction room at the end of $2021$ was nil and there were no

undeducted RRSP contributions.

Required: With the objective of minimizing Mr$.$ Musician's incone tax payable or increasing an

income tax refund, prepare Mr$.$ Musician's $2022$ income tax return using the ProFle 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. lgnore any GS

HST implications.

Tax Software AP $11-2$

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, Parkin$-$

son'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 OAS payments.

Valerie's parents separated two years ago in Scotland after her father, David Drugstore, suf$-$

fered 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 after his drinking

caused significant problems in his life. He is also living with George and Valerie white he is enrolled

as a full$-$time student at Western University. George is paying his tuition, and Martin has agreed to

transfer any available education$-$related amounts to George. Although Martin plans to file his $2022$

income 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 $($a person who uses sound to locate objects$),$ his

goal is to become a researcher at the Brain and Mind Institute and $$tudy the use of echoloca$-$

$.$tion. Kevin has agreed to transfer the maximum tuition credit to George.

Other information concerning George for $2022$ is provided on the following pages.

Required: Prepare the $2022$ income tax return of George Pharmacy using the ProFile tax

software program assuming Valerie 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.

Ignore GST$/$HST implications in your solution by assuming that George does not qualify for the

GST$/$HST rebate.Chapter $11$

Tax Software Assignment Problems

Personal Information : Tax payer

Title : Mr

First Name : George

Last Name : Pharmacy

SIN :$527-000-509$

Date of birth $($Y$/$M$/$D$)$ :$1958-07-02$

Marital.Status : Married

Canadian citizen? : yes

Provide information to Elections Canada and Ontario Health? : yes

Own foreign property of more than $$100,000$Canadian $,$ includihg an interest

in a foreign affiliate or disposed of a principal residence in the year?? : No

Taxpayer's Address

$123$ ZZZ Street, London, Ontario, NOZ $0$ZO

Phone number $(519)111-1111$

FamilyMembers

$|$ First Name

Last Name

SIN

Date of birth $($Y$/$M$/$D$)$

Net income

Valerie

Pharmacy

$527-000-483$

W$1957-12-30$

$$6,520$ in CPP

Child

Kevin

Pharmacy

$527-000-517$

$2006-10-17$

$|$Nil

Mother$-$in$-$Law

Joan

Drugstore

None

$1937-02-24$

$$500$

Family Members

First Name

Last Name

SIN

Date of birth $($Y$/$M$/$D$)$

Net income

Father$-$in$-$Law

David

$|$Drugstore

None

$1938-01-12$

$|$Nil

Brother

Martin

Pharmacy

$527-000-533$

$1975-06-02$

$$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 Cal

$$3,500$ for in$-$home help to take care of Kevin while sh$$ was gone.

T$2202($Martin$)$

Tuition feesfor Martin Pharmacy $($brother$)$

Number of months in schoolpart time

Number of months in schoolfull time

Box

A

B

C

Amount

$8,000$

$0$

$8$

T$2202-($Kevin$)$

Tuition fees for Kevin

Number of months in schoopart time

Number of months in schoofull time

Box

A

B

C

Amount

$3,600$

$8$

$0$

Donor

Valerie

George

Taxable Income and Tax Payable for Individuals Revisited

Tax Software Assignment Problems

Charitable Donation Receipts

Mothers Against Drunk Drivers $($MADD$)$

Canadian Institute for the Blind $($CNIB$).$

Am't

$1,000$

$3,000$

T$4$

$|$IssuerMega Pharma lnc$.$

Employment income

Employee's CPP contributions

Employee's El premiums

Income tax deducted

Employment commissions

Charitable donations

Box

$14$

$16$

$18$

$22$

$42$

$46$

Amount

$378,000\mathrm{.}00$

$3,499\mathrm{.}85$

$952\mathrm{.}74$

$114,000\mathrm{.}00$

$82,000\mathrm{.}00$

$400\mathrm{.}00$

In $2022,$ Mega reimbursed George $$3,788$ for meals and entertainment with clients, $$2\mathrm{.}268$

for hotels, and $$4,925$ for airline tickets.

In addition to George's salary, he also earns commissions of $$82,000,$ which are included in the

employment income of $$378,000.$ His employer requires him to have an office in his home and has

signed the form T$2200$ each year to this effect.

On October $1,2022,$ George purchased a new computer and software that will be used solely in

his home office for employment use. The computer cost $$3,600$ and the various software pro$-$

grams Cost $$1,250.$

House Expenses

$|$Area of home used for home office $($square feet$)$

Total area of home $($square feet$)$

Telephone line including high speed ihternet connection

Hydro

$|$Insurance$-$House

Maintenance and repairs

$|$Mortgage interest

Mortgage life insurance premiums

$|$Property taxes

$650$

$5\mathrm{.}000$

$620$

$3,200$

$4,000$

$3,800$

$6,200$

$400$

$6,700$

$($Y$/$M$/$D$)$ Patient

$2022-12-31$ George

$2022-08-31$ George

$2022-09-19$ George

Valerie

$2022-11-07$

$2022-06-07$ Joan

$2022-03-22$ David

$2022-12-20$ Martin

$2022-10-01$ Kevin

Medical Expenses

Johnson Inc.

Dr$.$ Smith

Optician

Pharmacy

Dr$.$Wong

Dr$.$Walker

Description

Dr$.$ Takarabe

Out of Canada insurance

Dental fees

Prescription glasses

Prescription

TropicalDisease Centre Prescription

Psychiatric counselling

Group therapy

Orthodontics and dental

Amount

$731\mathrm{.}00$

$155\mathrm{.}40$

$109\mathrm{.}00$

$66\mathrm{.}84$

$2,050\mathrm{.}00$

$390\mathrm{.}00$

$6,000\mathrm{.}00$

$30,000\mathrm{.}00$

Chapter $11$

Tax Software Assignment Problems

George paid $$800$ for the care and feeding of Kevin's seeing eye dog in $2022.$

At the beginning of $2022,$ George had a $2021$ net capital loss balance of S$10,500$ from the sale of

shares in $2021.$ He had not disposed of any capital property prior to $2020.$

Dispositions of Property

Description

Number of units

Year of acquisition

Date of disposition

Proceeds of disposition

Adjusted cost base

Outlays and expenses

Property $1$

Molson Inc. shares

$150$

$2019$

February $14$

$37000$

$27600$

$35$

Property $2$

Imperial Oil shares

$387$

$2020$

June $6$

$9,600$

$12,100$

$29$

Property$3$

Sailboat

NA

$2020$

October$1$

$74,000$

$72,000$

NA

Dispositions of Property

Description

Year of acquisition

Date of disposition

Proceeds of disposition

Adjusted cost base

Outlays and expenses

Property $4$

Motorcycle

$2021$

November $17$

$14000$

$21\mathrm{.}000$

N$/$A

Property$5$

Painting

$2015$

August $28$

$1,100$

$450$

N$/$A

Property $6$

Coin collection

$2019$

March $24$

$700$

$1,800$

N$/$A

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 $