In early July 2012, Dr. Elaine Matthews separated from her husband of some years. She maintained full custody of the couple's only child, a seven-year-old girl. Since May 1, 1998, Dr. Matthews had been working as a public health consultant for the Oshawa region. Just prior to her separation she had chosen to take advantage of a severance package from the Oshawa region. She accepted a staff position at Joseph Brant Memorial Hospital in Burlington, Ontario and moved directly from Oshawa to Burlington on September 1, 2012. She sold the former family home in Oshawa on September 15, 2012. Her husband had rented an apartment in Oshawa in late July 2012.
Dr. Matthews has some experience preparing her own tax returns but she has been particularly busy in recent months. She started her 2012 return but quickly decided she simply did not have time to finish it. She requested your assistance in completing her return.
You met with Dr. Matthews to go over her tax information related to 2012 and determined that she had correctly calculated her income under Subdivisions a, b, and c of Division B to total $158,488. Included in this correct computation were the following items:
Salary (from former employer) $ 96,000
Salary (from Joseph Brant Memorial Hospital) 60,000
Taxable benefits under section 6 of the Income Tax Act 1,743
Registered pension plan contributions (defined benefit plan) (6,750)
Consulting income (reported as business income) 8,000
Interest income from investments 540
Taxable dividends from investments 1,250
Share of rental loss from childhood home inherited from her parents (1,495)
Net taxable capital gains 4,800
Interest paid on investment loans (2,400)
Loss from limited partnership investment (rental property) (3,200)
$158,488
She provided you with the following additional details relating to 2012:
Miscellaneous income
Severance from former employer $ 41,538
Transfer of RPP accrued from former employer
Her former employer made a direct transfer of her accumulated RPP benefits (within prescribed limits) to her RRSP; her former employer had made vested contributions for the years 1998 through 2012............................................................................ $210,000
Spousal support
Under the terms of her separation agreement signed in September 2012, Dr. Matthews paid the following amounts for support of her husband:
Support ($500 a month for September-December) ........................................... $ 2,000
Rent on his new Oshawa apartment ($750 a month for September-December) ...3,000
Moving expenses from Oshawa to Burlington
Gas for house-hunting trips (four trips made during late August 2012) ....... $ 40
Selling costs of former Oshawa home (owned 100% by her; sold September 15, 2012):
Real estate commissions .............................................................. $ 12,000
Legal fees .................................................................................. 1,050
Costs of purchasing new Burlington home:
Legal fees .................................................................................. $ 850
Land transfer tax ......................................................................... 3,250
Costs of moving herself and her household effects:
Moving van to transport belongings .................................................. $ 600
Gas to drive herself and her daughter (120 km driven) ............................... 15
Hotel (2 nights while new home was being painted and cleaned; 2 X $100)...... 200
Meals (same two days as above 2 x $55) .............................................. 110
You have determined that the distance from her new home to Joseph Brant Hospital is 3.5 kilometers. The distance from Joseph Brant Hospital to her former home was 115 kilometers.
Care of her daughter
Part-time nanny employed January 1-August 31 .................................$ 8,976
YMCA overnight summer camp for two weeks in July while nanny was on vacation ($200 a week)........................................................................................ 400
Fall term (September-December) tuition fees for private school (excluding before and after school daycare) ...........................................................................4,000
Before and after school daycare for September-December (provided on premises of private school) ..................................................................................... 720
Fall term (September-December) transportation to private school .............. 1,200
Registered retirement savings plan contributions
Personal contributions through employment (March-December 2012) ..... 10,000
Personal contributions through employment (January-February 2013) ...... 4,000
Her 2011 earned income for RRSP purposes was $120,000; her employer had reported a pension adjustment on her 2011 T4 of $9,500; she had no unused RRSP contribution room at the start of 2012 and no undeducted balance of RRSP contributions
Legal fees paid
Legal representation during separation proceedings to establish requirements to make support payments ............................................................................ $ 1,600
Appeal of her 2010 income tax assessment (which she won) .................. 1,200
REQUIRED
Complete the calculation of income under Division B. Show all calculations whether or not they are necessary to the final answer. Explain briefly any items not used in your calculations.