George Jetson runs his own business as a sole proprietor. He does not have a background...

 

Transcribed Image Text:

George Jetson runs his own business as a sole proprietor. He does not have a background in accounting or finance but has been successful handling his own tax returns in the past. This past year, he made some capital investments in his business that he deducted on his tax return. The CRA has audited George's tax return and has rejected a number of his deductions because they are capital costs. This resulted in George underpaying his taxes and he will now have to pay penalties to the CRA. He has written to you for your guidance to help him better understand the rules so that he doesn't get in trouble with the CRA again. Here are the deductions that the CRA did not allow in full on George's tax return: Building (land makes up $800,000 of this value) $1,400,000 Patent 12,000 Furniture 30,000 120,000 $1,562,000 Tesla (passenger vehicle for George's employment use) Total Required: Write a short (one page) memo providing advice for Mr. Jetson regarding the correct tax treatment of the relevant capital costs. Be sure to consider that Mr. Jetson has limited knowledge of income taxation, so you need to analyze the issue at a high level and then clearly communicate the relevant tax rules in language that is appropriate to his level of understanding. Grade: This assignment is worth 10% of your final grade. The marks will be allocated as follows: • 50% of the marks – analysis of tax issues (using facts from the case and your knowledge of tax rules) • 50% of the marks – professional communication (including complete grammar and accurate spelling) at an appropriate level for the client George Jetson runs his own business as a sole proprietor. He does not have a background in accounting or finance but has been successful handling his own tax returns in the past. This past year, he made some capital investments in his business that he deducted on his tax return. The CRA has audited George's tax return and has rejected a number of his deductions because they are capital costs. This resulted in George underpaying his taxes and he will now have to pay penalties to the CRA. He has written to you for your guidance to help him better understand the rules so that he doesn't get in trouble with the CRA again. Here are the deductions that the CRA did not allow in full on George's tax return: Building (land makes up $800,000 of this value) $1,400,000 Patent 12,000 Furniture 30,000 120,000 $1,562,000 Tesla (passenger vehicle for George's employment use) Total Required: Write a short (one page) memo providing advice for Mr. Jetson regarding the correct tax treatment of the relevant capital costs. Be sure to consider that Mr. Jetson has limited knowledge of income taxation, so you need to analyze the issue at a high level and then clearly communicate the relevant tax rules in language that is appropriate to his level of understanding. Grade: This assignment is worth 10% of your final grade. The marks will be allocated as follows: • 50% of the marks – analysis of tax issues (using facts from the case and your knowledge of tax rules) • 50% of the marks – professional communication (including complete grammar and accurate spelling) at an appropriate level for the client

Answer rating: 100% (QA)

Answer CRA has Disallowed the Deductions claimed by George Jetson are as follows Building excluding ... View the full answer