Case Jeffrey Narley works for Layland & Co. (LNC), a Canadian Controlled Private Corporation (CCPC). Jeffrey, age 68, is married to Judy, who is 55. Jeffrey has a daughter from his first marriage, Amanda, who is 22. Jeffrey and Judy have two sons, Adam, age 13 and Leo, age 6. Jeffrey has provided you with the following details regarding his activities for 2022: Jeffrey's income for the year is as follows: Salary - gross $156,780 Less: Tax withheld (50,000) CPP contributions (includes $461 of enhanced contributions) (3,166) EI contributions (890) United Way charitable contributions through payroll deductions (600) Registered retirement contributions (RPP) (11,759) Disability insurance (500) Bonus (based on company profits for the year) 16,000 $100,866 Jeffrey has been provided the following benefits from his employer: RPP contributions to match his investment $11,759 Health and Dental group insurance coverage (paid to Blue Cross) 800 Group disability Insurance (employer pays 50% of the premiums) 500 Group term Life insurance 1,200 He drives mostly for work. During this year, he drove a total of 35,500 kms: 28,000 km to client locations, 3,500 km between home and work and the balance for other personal use. He purchased his Toyota SUV on January 10, 2022, for $58,000 plus $2,900 in GST. The SUV meets the definition of a passenger vehicle. Assume Jeffrey claimed the maximum CCA possible in 2022. The following are the total vehicle expenses for the SUV: Gas $7,500 Maintenance 1,400 Licence 350 Insurance 2,200 Additional costs of travel while away from the area of his home are airfare ($8,500), accommodation ($2,100), and meals ($2,500). Under Jeffrey's contract of employment, he is required to pay all of his own employment-related expenses. He regularly travels out of the municipality on employment-related matters. Jeffrey sold 2,200 shares he held in LNC, for proceeds of $122,000. He acquired 6,500 shares in 2007 as a result of exercising stock options. At the time he exercised his options, the shares were valued at $26 per share. He was granted the options in 2001 to purchase the shares for $18 per share. At the time he was granted the options, the shares were valued at $15. He has owned Marcus Co. shares for a number of years. Marcus Co. is a public Canadian company. The shares paid total dividends of $0.77 per share in 2022. On October 1, 2022, after the dividend payments for the year, Jeffrey sold 1,700 shares for $28 per share and incurred brokerage fees of $400. Based on his history of transactions, at the time of the sale, he had 1,700 shares at an adjusted cost base of $12.50 per share.

At the beginning of 2022, Jeffrey had two rental properties. These properties are expected to have the following operating cash flows associated with them: #1 #2* Gross rents received $ 35,000 $ 3,500 Expenses related to earning rental income: Advertising (for tenants) ..... 200 Property taxes ....... 5,400 1,200 Utilities (landlord provided). 5,800 2,700 Amounts are for the period of ownership and available for rent. Property #1 was purchased in 1993 at a cost of $110,000 for both the land and building. The cost of the land was $35,000 of this total purchase price. Property #2 was purchased in 2006 at a total cost of $415,000; the fair market value of the land at the time was $125,000. The UCC balance in Class 1 for property #1 was $26,489 and Class 1 for property #2 was $231,729 at January 1, 2022. During 2022, Jeffrey decided to sell property #2 for $648,000, effective June 1, 2022. The fair market value of the land was appraised to be $248,000 with the remaining amount to be allocated to the building. He plans to sell the rental property purchased in 1993 in 2026. Jeffrey used the proceeds to purchase a new sixplex residential property located downtown. The cost of the new property was $900,000, of which $375,000 related to the cost of the land. This property sale closed on August 1, 2022. He was able to rent the building's units to students beginning in September with cash flows as follows: Gross rents received .... $ 16,700 Expenses related to earning rental income: Advertising (for tenants) ..... 1,500 Property taxes . 11,400 Mortgage Interest......... . . . .. 31,200 Utilities (paid by tenants) Jeffrey's earned income for 2021 was correctly calculated to be $121,260. Jeffrey has always maximized his contribution to his RRSP and as such does not have any unused deduction room carried forward from the previous year. His T-4 from his employer showed a pension adjustment of $10,560 for 2021. Jeffrey contributed the following to his RRSP relating to 2022: From March 1 to December 31, 2022 $8,000 The first 60 days of 2023 2,200

Judy has provided you with the following details regarding her activities for 2022. Judy owns a retail clothing shop located in Market Mall. She runs it as a sole-proprietorship without her husband's involvment. Adam and Leo help out every Saturday at the shop. Neither receives a salary for their work. The income statement for 2022 and other information for Judy's shop are below: Revenues ......... $301,000 Cost of goods sold 120,400 Expenses: General and administrative ......... $96,320 Amortization on fixed assets ....... 26,910 123,230 57,370 Gain on disposal of fixed assets (see details below) ...... 98,325 Net income before income taxes..................." 155,695 Provision for income taxes (instalments paid in the year) .. 15,000 Net income after income taxes .......... $140,695 Additional information related to Judy's shop: The opening UCC balances as at January 1, 2022 were as follows: Class 1 (last building in the pool). $12,000 Class 8 ...... 2,000 Class 10 . 11,000 During 2022, Judy purchased the following asset for her business: Customer list from a competitor (unlimited life).. $8,000 In September 2022, Judy sold her owned business premises (consisting of land and the Class 1 building) and moved to a spot in Market Mall, which is currently being leased. She received proceeds of $55,000 for the land (original cost of $10,000). She moved to Market Mall in anticipation of significant increase in traffic flow (and hopefully profits). The details of the sale of the former Class 1 building sold during 2022, is set out below: Proceeds Original Cost Net book value Cl 1 building 75,000 36,000 20,000 Judy has the following loss carry-overs from prior years: Non-capital loss from 2018 of $37,000, Net-capital loss of $55,000, from the sale of shares that occurred in 2001. During 2022, Judy and Jeffrey made the following selected expenditures: 1. Care for the children: food and clothing for Adam and Leo $ 6,500 babysitter for half days during 30 weeks of school term 3,000 Sci-Fi camp for both children, four weeks for each child (8 weeks) 2,800

. Payments to Amanda to babysit for full days during 15 weeks of summer so Jeffrey and Judy could work 3,750 . Payments made to Amanda to babysit so the couple could go out on date night 750 2. Medical expenses, paid from January 1 to December 31, 2022, for the family are listed below. The family had no medical expenses in 2021. Amounts listed are the non-reimbursed amounts. Paid by Judy Patient Amount Prescriptions Judy $490 Laser Eye surgery Jeffrey 4,000 Teeth whitening Jeffrey 2,800 Special contacts Amanda 1,500 Special equipment (see below) Amanda 7,500 Prescriptions Leo 815 Jeffrey's daughter Amanda has very poor eyes and is considered legally blind. It costs $1,000 to buy her special contact lenses to enable her to have peripheral vision. Total costs in the year for Amanda's special lenses is $2,500 ($1,000 + 1,500). As a result, Amanda's only source of income is a scholarship from the U of S for $5,500. In spite of these hardships, she is attending the local university and with the aid of special equipment, purchased in January 2022 for $7,500, she is doing quite well. Amanda's tuition for the eight months that she will be in full-time attendance was $6,900. Amanda continues to live at home while she attends university. 3. Judy and Jeffrey both believe in giving back and as such, made additional contributions to registered charities of $1,700 and 1,500 respectively, in 2022.

Required: Part 1 - Calculation of Net Income for Tax Purposes (Division B - NIFTP) 1A. Calculate Jeffrey's NIFTP for 2022. Show supporting computations whether or not relevant to your final answer. 1B. Calculate Judy's NIFTP for 2022. Show supporting computations whether or not relevant to your final answer. Assume Judy has correctly filed her GST returns and that no GST is reflected in any of the amounts above. Part 2 - Federal taxes owing Please ignore your answer from Part 1 and use the following as your NIFTP when you start your calculations for this part (as to ensure everyone starts at the same place for Part 2): Jeffrey - $280,000 Judy - $120,000 NOTE: This NIFTP is not a check figure so please do not try to get your amounts in part 1 to agree to the amounts above.

2A. Calculate Jeffrey's net federal tax owing (after tax credits) and Judy's net federal tax owing (after tax credits) for 2022. Show supporting computations whether or not relevant to your final answer. Assume Jeffrey and Judy want to minimize tax where possible and all possible credits will be taken.

Answer rating: 100% (QA)

Answer Part 1 Calculation of Net Income for Tax Purposes Division B NIFTP 1A Calculation of Jeffreys NIFTP for 2022 Salary gross 156780 Less Tax withh... View the full answer