taxation question

s Earl Grey Taxes Earl Grey has come to you for some help in computing his income from his investments. He is trying plan for the payment of his 2018 taxes and wants an idea as to how much that tax bill will be. Earl is married to Flo and they have a daughter, Mint-Green, who is mentally infirmed and is 22. Earl has provided you with the following details regarding his activities for 2018. For Emtoment S85,000+ nume Earl's income for the year is as follows: Salary gross Less: CPP and El contributions 500) 10,000 $91,048 United Way charitable contributions through payroll deductions Bonus (based on company profits for the year) The costs of travel, partially for work, are as follows (he now has a 4x4 truck): Gas Maintenance Licence Insurance $5,000 1,000 200 Iso ve 1.800 $8,000 Note that Earl has regularly made charitable contributions yearly on his payroll deductions. He has discovered that he drives mostly for work, During this year, he has driven 34,000 km for work and only 6,000 km for personal use. He purchased his 4x4 from Red Rose Toyota, on January 10, 2018, for S32,500 plus PDI and delivery of $1,000, plus HST, for a total of $37,855. Additional costs of travel whi away from the area of his home are train fare ($2,500), accommodation ($3,000), and meals ($2,000) s 07 Under Earl's contract of employment, he is required to pay all of his own employment-related He regularly travels out of the municipality on employment-related matters. He has owned Chamomile Co. shares for a number of years. Chamomile is a public Canadian company. The shares paid total dividends of S0,06 per share in 2018. On October, 1,2018, after the dividend payments for the year, Earl sold 800 shares for $28.125 per share for total proceeds of $22,500. Brokerage fees are S200. Based on his history of transactions, at the time of the sale, he had 2.750 shares at an adjusted cost base of $6.50 per share. At the beginning of 2018, Earl had two rental properties. These properties are expected to have the following operating cash flows associated with them: Gross rents received.20,000 S16,000 #1 related to earning rental income Advertising (for tenants).200 Property taxes.1,400 Utilities (landlord provided4,200 3,000 Property #1 was purchased in 1995 at a cost of S90 000 for both the land and building. Th was$25,000 ofthis total purchase price. Property #2 was purchased in 2010 at a total cost of Sios fair market value of the land at the time was S60,000. The UCC balance in Class 1 for p $25948 and Class l for property #2 was $33,139 at January 1, 2018. e cost of the land o property was During 2018, the local community enacted strict new bylaws on the safety requirements of rental properties. To upgrade the two buildings to the new code would require $40,000 for property #1 and S60.000 for property #2. As a result, Earl decided to improve #1 and paid $40,000 during July 2018, However, h decided to sell property #2 and did so for S248.000, effective May 5, 2018. The fair market value of the land was appraised to be $120,000 and the building $128,000. Earl used the proceeds, net of the $40,000 needed for property #1, to purchase a new sixplex on Orange Pekoe Lane. The cost of the new property was $900,000, of which $150,000 related to the cost of the land This property closed on August 1, 2018. Interest on the $700,000 mortgage is $21,800 for the last five months of the year. He was able to rent the building's units to students beginning in September with cash flows as follows: Gross rents received Expenses related to earning rental income: S 18,000 Advertising (for tenants).. Property taxes 500 3,400 Utilities (paid by tenants) Required Calculate Earl's income under Division B. Show supporting computations whether or not relevant to your final answer. For items excluded from your calculations, describe why you excluded them. Ignore the HST rebate for this and subsequent years. Part B (25 minutes) Upon further questioning, Earl revealed that his daughter, Mint-Green, has very poor eyes. It costs $800 to buy her special contact lenses that last about three years. The last pair was purchased in November 2017. Even with the contact lenses, she can barely function and cannot obtain regular employment and so has no income. In spite of these hardships, she is attending the local university and with the aid of special equipment, purchased in January 2018 for $10,000, is doing quite well. Other medical receipts total about s200 per year and Earl cannot remember ever claiming the medical credit. Mint-Green's tuition for the eight months that she will be in full-time attendance is $4,000. While Mint-Green continues to live at home, Flo has decided to return to the work force and has a casual job. She is expected to earn $9,000 by the end of the year Required: Calculate Earl's federal taxes payable for 2018. s Earl Grey Taxes Earl Grey has come to you for some help in computing his income from his investments. He is trying plan for the payment of his 2018 taxes and wants an idea as to how much that tax bill will be. Earl is married to Flo and they have a daughter, Mint-Green, who is mentally infirmed and is 22. Earl has provided you with the following details regarding his activities for 2018. For Emtoment S85,000+ nume Earl's income for the year is as follows: Salary gross Less: CPP and El contributions 500) 10,000 $91,048 United Way charitable contributions through payroll deductions Bonus (based on company profits for the year) The costs of travel, partially for work, are as follows (he now has a 4x4 truck): Gas Maintenance Licence Insurance $5,000 1,000 200 Iso ve 1.800 $8,000 Note that Earl has regularly made charitable contributions yearly on his payroll deductions. He has discovered that he drives mostly for work, During this year, he has driven 34,000 km for work and only 6,000 km for personal use. He purchased his 4x4 from Red Rose Toyota, on January 10, 2018, for S32,500 plus PDI and delivery of $1,000, plus HST, for a total of $37,855. Additional costs of travel whi away from the area of his home are train fare ($2,500), accommodation ($3,000), and meals ($2,000) s 07 Under Earl's contract of employment, he is required to pay all of his own employment-related He regularly travels out of the municipality on employment-related matters. He has owned Chamomile Co. shares for a number of years. Chamomile is a public Canadian company. The shares paid total dividends of S0,06 per share in 2018. On October, 1,2018, after the dividend payments for the year, Earl sold 800 shares for $28.125 per share for total proceeds of $22,500. Brokerage fees are S200. Based on his history of transactions, at the time of the sale, he had 2.750 shares at an adjusted cost base of $6.50 per share. At the beginning of 2018, Earl had two rental properties. These properties are expected to have the following operating cash flows associated with them: Gross rents received.20,000 S16,000 #1 related to earning rental income Advertising (for tenants).200 Property taxes.1,400 Utilities (landlord provided4,200 3,000 Property #1 was purchased in 1995 at a cost of S90 000 for both the land and building. Th was$25,000 ofthis total purchase price. Property #2 was purchased in 2010 at a total cost of Sios fair market value of the land at the time was S60,000. The UCC balance in Class 1 for p $25948 and Class l for property #2 was $33,139 at January 1, 2018. e cost of the land o property was During 2018, the local community enacted strict new bylaws on the safety requirements of rental properties. To upgrade the two buildings to the new code would require $40,000 for property #1 and S60.000 for property #2. As a result, Earl decided to improve #1 and paid $40,000 during July 2018, However, h decided to sell property #2 and did so for S248.000, effective May 5, 2018. The fair market value of the land was appraised to be $120,000 and the building $128,000. Earl used the proceeds, net of the $40,000 needed for property #1, to purchase a new sixplex on Orange Pekoe Lane. The cost of the new property was $900,000, of which $150,000 related to the cost of the land This property closed on August 1, 2018. Interest on the $700,000 mortgage is $21,800 for the last five months of the year. He was able to rent the building's units to students beginning in September with cash flows as follows: Gross rents received Expenses related to earning rental income: S 18,000 Advertising (for tenants).. Property taxes 500 3,400 Utilities (paid by tenants) Required Calculate Earl's income under Division B. Show supporting computations whether or not relevant to your final answer. For items excluded from your calculations, describe why you excluded them. Ignore the HST rebate for this and subsequent years. Part B (25 minutes) Upon further questioning, Earl revealed that his daughter, Mint-Green, has very poor eyes. It costs $800 to buy her special contact lenses that last about three years. The last pair was purchased in November 2017. Even with the contact lenses, she can barely function and cannot obtain regular employment and so has no income. In spite of these hardships, she is attending the local university and with the aid of special equipment, purchased in January 2018 for $10,000, is doing quite well. Other medical receipts total about s200 per year and Earl cannot remember ever claiming the medical credit. Mint-Green's tuition for the eight months that she will be in full-time attendance is $4,000. While Mint-Green continues to live at home, Flo has decided to return to the work force and has a casual job. She is expected to earn $9,000 by the end of the year Required: Calculate Earl's federal taxes payable for 2018