Patrick Yang and Celine Smith are married with 2 children, aged 12 and 20. Celine is the vice president of ABC Ltd., a Canadian-controlled private corporation located in Mississauga, Ontario. ABC is an active business. You have confirmed that at least 90% of the fair market value of the assets of ABC are used in its active business and have been so used since the company was formed back in 2015.

Celine’s 2020 financial transactions include the following.

Salary and Benefits

1. Celine received an annual salary of $140,000 from ABC. From this amount, ABC deducted EI and CPP of $3,754 (includes CPP enhanced contributions of $166) and income tax of $19,000.

2. ABC provided Celine with a company car for her personal use. This car was available to Celine for all of 2020. The car is leased by ABC for a cost of $1,100 monthly which includes the HST on the lease payments. Celine has no driving for employment purposes. The car is driven strictly for personal use. Celine is responsible for paying the operating costs of the car.

3. In 2015 when the company was established, Celine received stock options in ABC. In 2017, she exercised 2,000 of her stock options and purchased shares in ABC for $5 per share. At that time, the shares were estimated to be worth $11 each. In 2020, Celine sold these 2000 shares for $25 each.

Personal Investing Activities

1. Celine has a portfolio of investments that includes some non-registered mutual funds. She has received T3 slips for 2020 that show the following income from these non-registered mutual funds.

• Cash amount of eligible dividends 2,400
• Cash amount of non-eligible dividends 400
• Interest from Canadian sources 215
• Capital gains 6,000

2. Some years ago, Celine invested $10,000 in a Canadian-controlled private corporation started up by a university Colleague. The business did well for several years and Celine received annual dividends from her investment for each of the last 5 years. However, due to unexpected circumstances, the business began to fail during 2020 and declared bankruptcy in November 2020. All of the company’s assets are used in an active business.

3. Celine paid her investment advisor a total of $2,250 in investment management fees during 2020.

Family Information

1. Patrick runs his own home renovation business. He has confirmed that his business will report net income for tax purposes for 2020 of $275,000. This is his only income for tax purposes.

2. Celine and Patrick paid eligible child-care expenses for their 12-year-old totalling $3,200 during 2020. In addition, they also paid registration fees to a summer camp for the 12-year-old totalling $2,000 for a 2-week overnight camp.

3. Celine and Patrick paid $15,000 of tuition to McMaster University in 2020 for their 20-year-old daughter who is in her second year of Engineering. She attended university for 8 months full time in 2020. During the summer months she had a part-time job. Her net income for tax purposes for 2020 has been correctly calculated to be $4,800.

4. Celine has added up the family’s medical expenses for 2020 and confirms that the total eligible expenses are $10,200. This includes $6,000 for dental work for the 20-year-old who had an accident while playing hockey early in 2020.

Other Relevant Income Tax Information

1. Celine contributed $27,230 to her own RRSP on May 1, 2020. Celine’s 2019 notice of assessment indicated that her RRSP deduction limit for 2020 was $27,230.

2. Celine has not used any of her life-time capital gain deduction.

3. Celine has no cumulative net investment loss as of December 31, 2019.

Required:

1. Calculate Celine’s minimum 2020 net income for tax purposes, taxable income, and federal income tax. Assume that Celine will claim any available tax credits that can be transferred from her 20-year-old daughter.

2. What is the filing deadline for Celine’s income tax return for 2020 and when would any balance of taxes owing be due for her for the 2020 year?

Answer rating: 100% (QA)

1 Calcul ate C eline s minimum 2020 net income for tax purposes taxable income and federal income ta... View the full answer