Mr. Trevor is married and has a 19 year old son. Mr. Trevor's spouse had 2023 net income of $3,400.

 

The son lives at home and, during the summer of 2023, he earned employment income of $3,300. At the end of the summer, he began full time studies at a university. His tuition fees, which totaled $6,500 for 2023, were paid for by his father. The son's only other income was $2,200 of eligible dividends on a $40,000 portfolio of public company shares that were given to him by his father on his 16th birthday. The son has agreed to transfer the maximum tuition credit to Mr. Trevor

 

Mr. Trevor has asked you to assist him in preparing his 2023 income tax return. To this end, he provides you with the following list of receipts and disbursements for 2023:

 

Receipts                                                                                             

Director's Fees                                                         $ 1,372

Royalty income on Patent Purchased in 2015       29,400

TFSA Withdrawal in January                                   10,000

Bond Interest income                                                    960

 

Disbursements                                                                                                     

Spousal RRSP Contribution in July                                         $ 4,200

TFSA Contribution in Dec (Less than Contribution Limit)       4,000

Rent Paid to Employer for Living Accommodation                 18,000

Financial Support of his father*                                                  17,100

 

*You ascertain that his father is physically infirm, is wholly dependent on Mr. Trevor for support, had income of $4,200 during the year, and lives in Arizona for health reasons.

 

Mr. Trevor is employed by a large public corporation with gross revenues of $110 million. His basic salary for 2023 is $71,500. Other information related to his employment is as follows:

• As part of his compensation package, his employer provides living accommodations that has a FMV $2,500 per month.

• Mr. Trevor is provided with an award of $3,600 in recognition of his outstanding performance.

• His employer sponsors a money purchase RPP. For 2023, Mr. Trevor and his employer each contributed $3,100 to this plan. These contributions are the same as those made in 2022.

• His employer withheld the maximum CPP contributions and EI premiums for 2023.

• On September 1, 2023, Mr. Trevor's employer granted him an option to purchase 500 of its shares at a price of $5 per share. The market price of the shares at that time was $4 per share. On December 1, 2023, the market price of the shares had increased to $9 per share. On that date, Mr. Trevor exercises his option and purchases the 500 shares. He still owns the shares on December 31, 2023.

• His employer provides him with an automobile to use for his employment duties. The automobile cost $41,000 in 2022. The UCC of the automobile at January 1, 2023 is $18,700. The Company pays all of the operating expenses which totaled $12,300 for 2023. Mr. Trevor drives the automobile 42,000 kilometers during 2023, of which 38,000 were for employment purposes and 4,000 for personal use. The automobile was available to Mr. Trevor throughout all of 2023.

Mr. Trevor provides you with the following information on his dispositions of property during the year:

 

                                                                POD                        ACB

Diamond Necklace                                 $1,100          $ 750

Oil Painting                                              3,800          5,100

Graphic Novel Collection                            800          2,500

Antique weapons Collection                    8,000          6,200

 

Assume Mr. Trevor's 2022 earned income for RRSP purposes was equal to his 2023 earned income. At the end of 2022, Mr. Trevor had no unused deduction room and no  undeducted  RRSP contributions.

Required: 

For Parts A to F, compute the required amounts for Mr. Trevor for 2023. Show all calculations, including all those necessary to determine the maximum RRSP deduction for the year.

A. Employment income.

B. Income from property.

C. Net taxable capital gains.

D. Net Income.

E. Taxable Income.

F. Federal Income Tax Payable.

G. Indicate any available carry over amounts for Mr. Trevor and his son and the applicable carry over provisions.

H. Mr. Trevor's son would like some advice on whether he should contribute to a TFSA and/or an RRSP. What would you suggest he do, and why?

Answer rating: 100% (QA)

A Employment income Basic salary 71500 Living accommodations FMV 2500 x 12 30000 Performance award 3600 Total employment income 71500 30000 3600 105100 B Income from property Bond interest income 960 ... View the full answer