Wendy is a salesperson for Co-op Inc., a Canadian public corporation. The company produces various hardware. Wendy's annual base salary is $50,000 plus a commission of 1.5 percent of her annual cash sales. Her 2019 sales totaled $3,200,000, with $200,000 of this total collected by the company in 2020. Her 2020 sales amounted to $2,800,000, but the company had yet to collect $300,000 of these by December 31, 2020.

In 2020, the Co-op paid Wendy her salary plus commission income. Her T4 for 2020 states the following was withheld from her salary:

Contributions To Her Co-op Pension Plan $3,000

CPP Contributions 2,898

EI Premiums 856

Premiums for Co-op's Dental And Health Benefits* 1,500

Federal Income Tax Withheld 15,000

* The plan is funded 50/50 by the employees and the employer.

Wendy is covered by the Co-op's group term life insurance. Her coverage is equal to her annual base salary. The company pays a premium of $5 for every $1,000 of coverage to the Insurance Company.

Wendy noticed a problem with a line of hinges before they were shipped and saved the company an estimated $360,000 in product recalls. Consequently, she won the employee of the year reward and received a new cell phone which cost the company $900.

In January of 2019, Wendy's spouse passed away and her two children, Rye who is 13 and Jill who turned 18 on April 30, 2020, miss their father. In September 2019, the Co-op transferred her from Moncton to Guelph. The Co-op paid for all her moving expenses. However, she incurred a $30,000 loss on the sale of her Moncton home. The Co-op reimbursed her $20,000 of this $30,000 loss, on January 20, 2020.

In the spring of 2019, the Co-op granted Wendy the right to purchase up to 5,000 shares of the company for $17 per share as part of the employee stock option plan. At the time the option was granted, the shares were trading for $15. On February 1, 2020, when the shares were trading at $20 per share, she exercised her option to purchase 3,000 shares and paid for the shares with an interest free loan from her employer. She received the loan on February 1, 2020, and repaid it in full on December 31, 2020, with the proceeds from selling 2,000 shares at $22 per share on December 24, 2020.

Throughout 2020 the Co-op provided Wendy with an automobile, which it leases for $450 per month. The automobile was available for her to use including any personal use. During the year, Joan drove a total of 35,000 kilometers, 8,000 of which were personal. Except for $2,200 of car insurance, the Co-op did not pay for any of her automobile operating expenses as these were paid by Wendy. Wendy must also pay her own salesperson expenses (including the automobile operating expenses).

Wendy meets all of the conditions of ITA 8(1)(f) of the Income Tax Act (deductible salesperson expenses).During the year she incurred the following:

Total Automobile Expenses (Excluding Insurance) $5,400

Meals And Entertainment With Clients 2,600

Hotels 1,500

Wendy is a member of a hardware professional association. Her annual membership dues are $1,400.

Wendy also has a sideline business called The Diva. She started her business a few years ago and has continued it in Guelph. Wendy prepares and sells pastries from her home. Most of her sales are for events which are held on weekends. Her daughter Jill helps in the business by delivering pastries. Jill is not paid any monetary compensation as she is just happy to help out her mother.

Wendy provides you with the following information for 2020 with respect to her business:

Sales Revenues $40,000

Supplies (Flour, Sugar, Boxes, Etc.) Purchased 12,000

Purchase Of New Commercial Oven

(For Business Use Only) 2,200

Purchase Of New Automobile For Cash 39,000

Automobile Operating Expenses 3,000

Wendy had an opening inventory of supplies totaling $1,600 and on December 31, 2020, she had $900 worth of supplies on hand.

In January 2020, Wendy sold her old automobile for $12,000. It had cost $35,000. Both the old and the new automobiles were used solely for her Diva (pastry) business, as she uses the employer provided automobile for the little bit of personal travel that she does do.

Wendy uses 20 percent of the space in her home for the business. Wendy does not claim CCA on her home as this would result in future recapture and capital gains implications. Her 2020 household expenses include the following:

All Utilities $5,400

Property Taxes 3,800

Maintenance 1,600

Phone Line Dedicated To The Business 800

Insurance On Her Home 1,900

Mortgage Interest 12,300

The UCC balances at January 1, 2020 are as follows:

Class 8 $3,100

Class 10.1 9,000

Her son Rye is in high school and has no income of his own. Her daughter Jill was enrolled part-time (4 months) at a local college. Wendy paid her tuition of $1,600 and Jill agreed to transfer the related tax credit to her mother. Jill's 2020 Division B Net Income For Tax Purposes is $7,200.

During the year, Wendy paid $5,000 for orthodontic work (braces) for Rye. She was reimbursed 50 percent of the amount through the company's dental and health plan.

During 2020, Wendy made $1,600 of contributions to registered charities.

Assume the prescribed rate for benefits during all four quarters of 2020 is 1 percent.

Required:

A. For the 2020 taxation year, calculate Wendy's minimum:

1. Division B - Net Income For Tax Purposes,

2. Division C - Taxable Income,

3. Division E - Federal Tax Liability.

In determining these amounts, ignore GST, PST and HST considerations.

B. Discuss any tax planning advice you could provide to Wendy.