TIF Problem Six - 15

Comprehensive Case (Chapters 1 To 6)

Mr. Martin Bowles is 43 years old and is employed by, Dominion Brass, a large public company.During 2012, his basic salary was $89,000.In addition, he earned $12,000 in commissions.His employer withheld the following amounts from his income during 2012:

RPP Contributions*$3,750

EI Premiums840

CPP Contributions2,307

Union Dues430

Payments For Personal Use Of Company Car1,200

*Mr. Bowles' employer makes a matching contribution of $3,750 to his RPP.

His employer provides Mr. Bowles with a car which is leased at a rate of $459 per month, a total of $5,508 for the year.During 2012, the car is driven 33,000 kilometres, of which 24,500 are related to his employment activities.The car was used by Mr. Bowles for 11 months during 2012.When he is not using the car, he is required to return it to the company's garage.

Mr. Bowles is provided with an allowance of $400 per month to cover hotel and meal costs during his employment related travel.Mr. Bowles' actual costs for 2012 were as follows:

Hotels$2,850

Meals1,875

It is the policy of Dominion Brass to reimburse tuition paid by employees when taking college or university courses.During 2012, Mr. Bowles received reimbursements of $1,600 for twocourses.Of this total, $1,000 was for a two day marketing course, while $600 was for a weekend course in art appreciation.

During 2012, Dominion Brass gave Mr. Bowles a $450 watch in recognition of his 10 years of service with the company.In addition, all employees were given a $400 gift certificate for purchases at a local department store.

In 2011, Mr. Bowles was granted options to purchase 1,500 shares of Dominion Brass stock at a price of $52 per share.At that time, the shares were trading at $50 per share.In June, 2012, when the shares are trading at $61 per share, Mr. Bowles exercises the options and immediately sells the resulting shares at that price.

On January 1, 2012, Mr. Bowles started a management consulting business located in an office that he rents for $500 per month.In order to run his business effectively, he made improvements to the office space that cost $12,000.His lease on the office terminates on December 31, 2014 and does not contain any renewal options.

Other information related to this business is as follows:

Revenues During 2012, Mr. Bowles issued invoices for his services totalling $41,750.In addition, he has unbilled work in progress of $8,500.

Capital Expenditures Mr. Bowles spent $10,000 for furniture for his new office.In addition, he purchased a computer for $1,150 and application software for $836.

Costs During 2012, the following costs were incurred in operating the management consulting business:

Part Time Assistant$5,725

Office Supplies347

Monthly Telephone Service312

Cell Phone Charges (For Business Only)211

Meals With Clients And Client Entertainment3,150

As the rented office is in the same building complex as his home, Mr. Bowles makes no use of his employer's vehicle for operating this business.

Mr. Bowles is married and has two children:

Sally, Martin's spouse, has 2012 income from part time work of $3,450.

Marie is 14 years old and has income of $2,300.All of this income resulted from the investment of rewards that she has received for science projects.

Ellen is 19 years old and attends university on a full time basis for 8 months during 2012.Martin pays her tuition costs of $9,800, as well as the cost of textbooks and supplies.These latter costs total $1,500.As Ellen has no income of her own, she intends to transfer all of her education related tax credits to Martin.

Marie is enrolled in a gymnastics program that costs $1,800 per year.The program has one meeting each week through the months of June, July, and August.

The family's 2012 medical expenses, all paid for by Mr. Bowles, are as follows:

Martin$ 2,500

Sally1,850

Marie1,600

Ellen6,540

Total$12,490

During 2012, Mr. Bowles makes donations to registered charities of $1,425, as well as contributions to registered federal political parties in the amount of $275.

Required: Calculate Mr. Bowles' 2012 Net Income For Tax Purposes, his 2012 Taxable Income, and his minimum 2012 federal Tax Payable without consideration of any income tax withheld by his employer.Ignore GST and PST considerations.