Gerald Miles is a photographer, working as a self-employed. He prepared a list of his expenses in 2020:

• Car lease payments: $12,690
• Driver’s license and car registration: $410
• Mortgage interest: $5,210
• Gas for the car: $1,990
• House repairs and maintenance: 3,500
• Interest, business line of credit: $(240)
• Snow removal: $350                                              
• Home insurance: $510
• Car insurance: $860
• Car maintenance: $1,200
• Equipment maintenance: $1,930
• Office supplies: $(670)
• Gym membership: $680
• Photography books: $450

You also collect the following information:

• Gerald’s gross income in 2020 is $(39700).
• In 2019, Gerald deducted a reserve for doubtful accounts of $1,300.
• For 2020, he estimates the doubtful accounts at $2,000.
• Gerald’s home office represents 800 square feet and the house is 3,300 square feet.
• For 2020, he drove a total of 10,200 km, (6,200) of which were for business.
• For a total of $1,700 spent on phone and internet, he estimates 30% would be business related.
• UCC of Class 8 on January 1, 2020 is $15,100. In 2020, Gerald purchased new photography equipment for $9,600 (eligible for the accelerated CCA).

Required:

a) Prepare the T2125 and TP-80 forms in Taxprep to calculate Gerald’s net business income to be declared to the CRA and RQ for 2020.

b) Briefly explain what expenses, from the above list, could not be considered (partly or entirely). Also explain why the net business income for Quebec is not the same as Federal.

Show all your calculations and explanations. Assume all amounts include any sales taxes and ignore their calculation.

Answer rating: 100% (QA)

a The T2125 and TP80 forms in Taxprep can be used to calculate Geralds net business income to be dec... View the full answer