Mr. and Mrs. Fox acquired a rental property on January 2, 2021, in the City of Ottawa. Although it is generally difficult to rent a property during the coldest winter months in Ottawa, the homeowners were happy to find a tenant to rent the property beginning January 2^nd with the help of an agent. Here are the details of the property purchase and associated costs:

Total purchase price + associated costs: $435,000 ($200,000 attributed to land value)

Property address: 222 Carling Avenue, Ottawa, ON. K2A 1V4

Rent Collected: $1850/month for all twelve months

Expenses: Advertising $125

Insurance $950 (prepaid for two years)

Mortgage interest $9,000

Agent`s fee for finding tenant $1,850

Property Taxes $4,000

In addition to rental income from the new property, Mr. and Mrs. Fox continue to rent out a room in their home to an Algonquin College student.

The address of their home is 111 Spring Garden Street, Nepean, ON, K2G 2S3. A student occupies 10% of their home.

Rent Collected: $350/month for all twelve months

Expenses: Insurance $1,200 (prepaid for two years)

Mortgage interest $5,350

Property Taxes $4,000

Utilities $3,000

**CCA will not be claimed on any asset for this home property

Mr. and Mrs. Fox each own 50% of their home and the rental property on Carling Avenue.

1. Explain how income would be split (% allocated to each spouse) between Mr. and Mrs. Fox and how you would reflect this in form T776 so that it carries out the proper calculations?

2. Explain how you would enter (in Form T776) information pertaining to the 10% use of the home by the student. How will this impact the number of expenses Mr. and Mrs. Fox can claim with respect to the rental of a portion of their home.

3. Calculate the amount of rental income that would be included in Mrs. Fox’s income for the 2021 taxation year.

Answer rating: 100% (QA)

a The income would be split evenly between Mr and Mrs Fox so each would report 50 of the total incom... View the full answer