John Smith is 55 years old, married to Kim (age 50 years). Kim’s only income is $2,000 of interest income.

John is a lawyer with his own law practice. John’s net business income from his practice (a sole proprietorship) for the current year was $86,000.

John is also a partner in a restaurant business, which incurred a total net business loss of $18,000 in the current year; as a partner in this business, John’s share of this loss is $6,000. The restaurant business also incurred a 

large business loss in the previous taxation year, which John was not able to fully utilize on his prior year’s tax return; hence, John has a non-capital loss carryover balance of $2,000.

In the current year, John received interest income (which is property income) of $1,800 from TD Bank (a Canadian bank).

In November of the current year, John disposed of various shares and marketable securities, which resulted in a taxable capital gain of $8,000, and he disposed of land for an allowable capital loss of $5,000. John has a net (allowable) capital loss carry forward (realized five years ago) of $4,000, which John would like to use as soon as possible.

John provides you with the following other information:

• John always makes a donation to the United Way, a registered charity, during its annual campaign. In the current year, he made a donation of $1,500 to United Way.

• John personally incurred the following medical expenses during the current year:

Expenses	Amount
Orthodontic work for David (braces removed)	$5,475
New prescription eye glasses for Susan	1,250
Prescription medication for Kim (50% covered by private health care)	475
Prescription medication for John (50% covered by private health care)	785
Private health care premiums	1,500

Answer the following:

1. Calculate John’s net income (in accordance with Section 3 of the ITA) and taxable income in the current year. Show all your calculations.

2. Calculate John’s net federal tax payable (including non-refundable credits) in the current year. Show all your calculations.

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Here we have added up income from sole propriet... View the full answer