You meet with the partner, Aram Anzari, who has instructions for a special personal tax return to

Fantastic news! We've Found the answer you've been seeking!

Question:

You meet with the partner, Aram Anzari, who has instructions for a special personal tax return to prepare. Aram asks you to prepare the 2017 tax returns for his good friends Kathy and Kevin Dhaliwal. In Excel, you will need to calculate the federal income taxesp ayable, showing all components and calculations for the Dhaliwals. You have been asked to ignore any CPP/QPP on self-employment income. You have also been asked to write a short memo to Kevin and Kathy explaining the results of the tax calculation and when their returns are due. Aram also asked you to explain any evidence that the Canada Revenue Agency (CRA)may request for the Dhaliwals’ claim for child care expenses and donations. He is aware of the fact that the CRA has been auditing these items more frequently and he wants to make sure the Dhaliwals are ready to respond. Aram has provided you with Kevin and Kathy’s personal tax information in the appendix. Appendix Kathy Dhaliwal — Personal tax information Remember: The current tax year that you are preparing the taxes for ended December 31, 2017. The prior tax year ended December 31, 2016. Kevin (age 48) and I (age 44) have numerous sources of income and deductions, and we want to ensure we pay as little tax as possible. We have two children: Sam (age 5) and Eric (age 2). We incurred $17,000 of daycare expenses during the year. After taking a year off with Eric, Kevin decided not to return to his full-time job at a privately held Canadian company, VJuice Inc. Instead, he returned to the workforce as an independent contractor for the Saskatchewan Department of Health on January 4, 2017. Kevin received contract income of $43,000 that was reported on a T4A slip as self-employment income for the year. One expense he wants to claim relating to his contract is meals and entertainment of $2,500. I am a senior executive at a private company called Wheat Design Inc. (Wheat). During the year, I received a salary of $325,000. My T4 slip also indicates the following: Income tax $60,000 Group medical premiums 2,200 CPP contributions 2,564 (max) EI premiums 836 (max) RPP contributions 6,000 Charitable donations 1,000 All senior executives at Wheat are provided with a leased vehicle of the employee’s choice. I am leasing a Mercedes-Benz. The monthly payment is $750, which includes $75 for insurance, all paid by the company. The original cost of the car was $55,000 (ignore GST/HST). During the year, I drove a total of 60,000 km, of which 18,000 km were considered personal. I use a company Visa card to pay for vehicle operating costs. During the year, these operating costs paid by Wheat totalled $6,500. I also received an allowance of $300 per month to cover any additional vehicle expenses that I cannot, or do not, put on the company’s Visa. Before starting his contract work, Kevin decided he had to have a new vehicle. He purchased a new minivan with full warranty when he started his contract at a cost of $25,000 (ignore GST/HST). He drove the van 50,000 km during the year, of which 32,000 km were business-related. Expenses related to the vehicle for the year included: Gas, oil changes, and repairs $ 8,000 DVD player 1,000 Insurance 1,500 Parking tickets 500 Kevin also paid $2,000 of interest that he feels is not deductible for tax purposes. It relates to a personal line of credit that he used to purchase the van. Kevin’s contract position with the Saskatchewan Department of Health also involved working more than 60% of his time from home, and he always met with department supervisors at home. Kevin used his home office, which took up approximately 10% of our home. During the year, we incurred the following home expenses: Mortgage interest $ 5,000 Property taxes 4,000 Electricity 3,000 Home insurance 500 Home office repairs 1,000 I also received some perks from Wheat that were not included on my T4 slip. Wheat paid 100% of the premiums for my group disability insurance ($2,500 per annum), as well as my personal life insurance premiums ($1,500 per annum). Wheat has a company condo in Cuba that all senior executives can take their family to for one week per year. Similar accommodations in Cuba would cost $5,000 if I had to pay for them myself. I have taken my family there the past three years. The company also provides support to the employees for professional development. I took one $3,000 course during the year on “effective leadership.” My 2016 Notice of Assessment shows that my 2017 RRSP deduction limit is $15,000. On December 31, 2017, I made an RRSP contribution of $10,000 to my own RRSP and $4,000 to a spousal RRSP. I made an additional $5,000 contribution to a spousal RRSP on April 1, 2018. In addition, my Notice of Assessment indicated that I had undeducted RRSP contributions from 2016 of $4,000. We sold our home on July 28, 2017, for $850,000. We had originally purchased this house for $375,000 10 years ago. We also own a cottage worth $650,000 that we purchased 10 years ago for $200,000. We plan to continue owning this property as our family cottage. I also have a significant investment portfolio held at a financial institution, which provided the following information: Description Interest Actual eligible dividends Capital gains Actual ineligible dividends Investments, CDN account 0 0 3,000 $2,000 Investments, CDN account $2,500 0 0 0 I currently have a net capital loss carryforward of $2,500 (incurred last year). We are proud of our investment record. This is the only loss we have ever incurred in our portfolio. Otherwise, even after taking into account all investment expenses, we always make money. I also sold the following property during the year: Description Proceeds Cost Sailboat $12,000 $30,000 Coin collection 10,000 $4,000 During the year, we also incurred the following expenses: Cholesterol testing $ 500 Political contributions 1,000 Membership fees — Nobody’s Gym 2,000 Family dental expenses 3,000 I was nervous that I was going to owe a significant amount of tax, so I made an instalment payment a few weeks ago of $5,000.