Ashley and Kris have come to ask you some questions regarding their 2021 tax returns. The couple

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Question:

Ashley and Kris have come to ask you some questions regarding their 2021 tax returns. The couple lives in a common-law relationship. Kris is a chef at Mountain Hotel and Ashley is an electrician.

Kris’s remuneration (salary) in 2021 was $86,000. The following information is available from Kris’s 2021 T4 slip:

Deductions from pay:

CPP and EI 3,754

Registered Pension Plan Contribution 2,000

Income tax deducted 25,000

Mountain contributes an equal portion to Kris’s RPP. Kris is also provided with a company car for use during the entire year. The car is leased by Mountain. Lease payments are $550 per month. Mountain pays $400 per month for the operating costs of the vehicle. Kris drove the car a total of 22,000 kilometers in 2021. 9,000 of these were for personal travel. Kris also earned $3,000 in 2021 from Mountain’s dining room tip pool. Lux did not report the tips on Kris’s T4. CPP enhanced contribution is $166.

Kris withdrew $10,000 from an RRSP in 2021 for use other than education or homeownership. Both Kris and Ashley contribute to their TFSAs each year. They each have a balance of $8,000 in their TFSAs, bearing 3% annual interest.

Ashley earns $65,000 and is waiting for the 2021 T4 from the electrical company to arrive in the mail, so will address some other issues at this point in time that might affect the 2021 taxes.

1) Ashley sold a small piece of land in 2021 (which is capital in nature) for $68,000. The land originally cost $50,000. The selling costs were $800. Proceeds of $35,000 were received in 2021 and the remainder of the funds will be received this year (2022).

2) Ashley began a small farming operation on the couple's acreage in 2021. The farm revenue totaled $5,000 in 2021 and expenses were $17,000. Ashley has never farmed before, but the business looks promising and a significant increase in sales is expected in 2022.
Required:
A. Calculate Kris's minimum net income for tax purposes, and taxable income, for 2021. Show your work using the statutory formula from Section 3 of the Income Tax Act.
B. Calculate Kris's federal tax liability for 2021.
C. Calculate the 2021 tax consequences from Ashley's two issues.