Kevin Smith is a senior sales manager at Tradeco Ltd. He worked for the same company...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Kevin Smith is a senior sales manager at Tradeco Ltd. He worked for the same company for a number of years and was using his good friend's neighbor to do his taxes but this year he got a reassessment from CRA and may end up paying back a large amount of money. He wasn't too happy with his current situation and asked you to help him with reassessment. He disagrees with the reassessment and asked you to file a Notice of Objection. He did not bring the reassessment notice but assures you that it is wrong. Kevin also asked you to prepare his current year taxes as he decided that from now on he would be using a professional to prepare his taxes. Kevin provided you with his personal information that you will need to prepare his tax return: Name: Kevin Smith SIN: 999 999 998 Marital Status: Married Date of Birth: June 15, 1970 Address: 402 25 Ave NW Calgary, Alberta T2M 2A7 Kevin's mother, Mary, moved with him after his father passed away. She is dependent on Kevin for day-to-day living. She was recently diagnosed with the onset of dementia by her doctor and they are awaiting further results and diagnosis form some recent tests. She receives a modest $12,486 in pensions as her total income. Her date of birth is July 24, 1945 and Kevin's sister prepares her tax return (SIN 999 999 899). Kevin's spouse, Rose, does not have any income. Her date of birth is January 15, 1973; her SIN is 999 989 999. Kevin gave you the following receipts for the health care expenses he paid in the year, which were quite sizeable: For Kevin: Dental - Dr. Paul Swiss on March 26 for $1,300 Dental - Dr. Paul Swiss on April 3 for $1,750 For Kevin's mother: Medically prescribed painkillers - $575 Kevin has health and dental insurance at work, but these amounts were not covered as the dental insurance has a 50% co-pay provision. He made donations to the The Mustard Seed of $100 and the Make a Wish Foundation for $320 which he tries to make a habit of doing every year. Kevin paid Canadian Professional Sales Association dues $1,300 and made $3,500 in RRSP contributions. His Notice of Assessment shows his RRSP contribution limit to be $31,300. Attached are the copies of Kevin's tax slips: T4 Tradeco Ltd. T5 - Great West Life Great West Life sent a statement to Kevin with the following information on the investment counsel fees paid during the year and as always, he is planning to deduct these fees: RRSP Account TFSA Account Non-registered account He would like to start learning more about managing his money, so he took an online course on investing for $450. He also subscribed to a print newsletter for $29 per month for all 12 months. He was told by the course administrator that the course and newsletter could be claimed on his tax return. $1,865 575 1,596 Kevin purchased a condo about 10 years ago for 140,000. He is wants to sell this condo next year and to purchase another condo, but this time in Beamsville, Ontario as he plans to relocate. He knows that there will be capital gains on the sale as the prices went up since then, but he plans to buy the property in Ontario within one year of selling his condo so that he doesn't have to pay any tax until he decides to sell Beamsville's property. He knows that he will not have to pay taxes on this capital gain because his 'tax guy' told him about the replacement property rules. He rents out his condo for $810/month (265 Douglas Road, Unit 56, Calgary, Alberta TP2 1P7). He provided you with a bundle of paperwork from which you were able to extract the following information on the property: Interest on mortgage Property tax Condo fees (other expenses) Home insurance Repair & Maintenance (fridge repair) $2,700 1,754 4,164 847 384 You looked through the previous year's tax return and confirmed that there was no CCA taken on any assets or the property itself. Kevin feels he pays too much tax and is wondering if he can reduce taxes he pays on his income by deducting CCA. On an annual basis, Kevin would take a day or so on the weekend to add up all his receipts and put them in envelopes with totals. Kevin knows that he can deduct all these expenses because he was required to pay for these expenses in his employment contract and his employer signed T2200 form. Kevin's employer is not GST registrant and therefore Kevin does not qualify for a GST rebate. Below is a summary of the envelopes and receipts. Home office expenses Mortgage interest Property taxes Insurance Utilities Home phone line Home office is approximately 280 sq. ft out of 1,400 total. Listing of sales expenses New laptop Entertainment of clients Golf club membership $2,800 1,700 2,100 2,578 650 Repairs Insurance 572 1,685 1,800 Motor vehicle expenses (32,305 km in total and 18,936 for business) Gas $1,768 530 1,900 150 License fees Kevin bought the vehicle in 2005 for 25,000. UCC of the beginning of the year was 15,300. In 2005, Kevin lent his nephew $50,000. Nephew was laid off from his job and was thinking about starting his own company, but instead used these funds to buy a car and pay for education. Unfortunately, his nephew was never able to repay him and recently had to declare bankruptcy, which included Kevin's loan. There are no hard feelings, he says, but he would like to use that against the capital gain if he could. His former tax adviser referred to something called "ABIL". Required: Part A (35 marks) In Excel, calculate Kevin's 2021 Net Income for Tax Purposes, Taxable Income and Federal Tax Payable or Refund and explain to him why you excluded any of the above information from your calculations. With regards to reassessment, determine next steps and what additional information you require before discussing the merits of the disputed items. Part B (12 marks) Complete a T1 Tax return. When done, go to form "2.T1", section "Step 7: Refund or balance owing", and override Provincial or territorial tax amount with a zero (if there is a provincial tax) as this case asks you to calculate federal taxes only. Kevin Smith is a senior sales manager at Tradeco Ltd. He worked for the same company for a number of years and was using his good friend's neighbor to do his taxes but this year he got a reassessment from CRA and may end up paying back a large amount of money. He wasn't too happy with his current situation and asked you to help him with reassessment. He disagrees with the reassessment and asked you to file a Notice of Objection. He did not bring the reassessment notice but assures you that it is wrong. Kevin also asked you to prepare his current year taxes as he decided that from now on he would be using a professional to prepare his taxes. Kevin provided you with his personal information that you will need to prepare his tax return: Name: Kevin Smith SIN: 999 999 998 Marital Status: Married Date of Birth: June 15, 1970 Address: 402 25 Ave NW Calgary, Alberta T2M 2A7 Kevin's mother, Mary, moved with him after his father passed away. She is dependent on Kevin for day-to-day living. She was recently diagnosed with the onset of dementia by her doctor and they are awaiting further results and diagnosis form some recent tests. She receives a modest $12,486 in pensions as her total income. Her date of birth is July 24, 1945 and Kevin's sister prepares her tax return (SIN 999 999 899). Kevin's spouse, Rose, does not have any income. Her date of birth is January 15, 1973; her SIN is 999 989 999. Kevin gave you the following receipts for the health care expenses he paid in the year, which were quite sizeable: For Kevin: Dental - Dr. Paul Swiss on March 26 for $1,300 Dental - Dr. Paul Swiss on April 3 for $1,750 For Kevin's mother: Medically prescribed painkillers - $575 Kevin has health and dental insurance at work, but these amounts were not covered as the dental insurance has a 50% co-pay provision. He made donations to the The Mustard Seed of $100 and the Make a Wish Foundation for $320 which he tries to make a habit of doing every year. Kevin paid Canadian Professional Sales Association dues $1,300 and made $3,500 in RRSP contributions. His Notice of Assessment shows his RRSP contribution limit to be $31,300. Attached are the copies of Kevin's tax slips: T4 Tradeco Ltd. T5 - Great West Life Great West Life sent a statement to Kevin with the following information on the investment counsel fees paid during the year and as always, he is planning to deduct these fees: RRSP Account TFSA Account Non-registered account He would like to start learning more about managing his money, so he took an online course on investing for $450. He also subscribed to a print newsletter for $29 per month for all 12 months. He was told by the course administrator that the course and newsletter could be claimed on his tax return. $1,865 575 1,596 Kevin purchased a condo about 10 years ago for 140,000. He is wants to sell this condo next year and to purchase another condo, but this time in Beamsville, Ontario as he plans to relocate. He knows that there will be capital gains on the sale as the prices went up since then, but he plans to buy the property in Ontario within one year of selling his condo so that he doesn't have to pay any tax until he decides to sell Beamsville's property. He knows that he will not have to pay taxes on this capital gain because his 'tax guy' told him about the replacement property rules. He rents out his condo for $810/month (265 Douglas Road, Unit 56, Calgary, Alberta TP2 1P7). He provided you with a bundle of paperwork from which you were able to extract the following information on the property: Interest on mortgage Property tax Condo fees (other expenses) Home insurance Repair & Maintenance (fridge repair) $2,700 1,754 4,164 847 384 You looked through the previous year's tax return and confirmed that there was no CCA taken on any assets or the property itself. Kevin feels he pays too much tax and is wondering if he can reduce taxes he pays on his income by deducting CCA. On an annual basis, Kevin would take a day or so on the weekend to add up all his receipts and put them in envelopes with totals. Kevin knows that he can deduct all these expenses because he was required to pay for these expenses in his employment contract and his employer signed T2200 form. Kevin's employer is not GST registrant and therefore Kevin does not qualify for a GST rebate. Below is a summary of the envelopes and receipts. Home office expenses Mortgage interest Property taxes Insurance Utilities Home phone line Home office is approximately 280 sq. ft out of 1,400 total. Listing of sales expenses New laptop Entertainment of clients Golf club membership $2,800 1,700 2,100 2,578 650 Repairs Insurance 572 1,685 1,800 Motor vehicle expenses (32,305 km in total and 18,936 for business) Gas $1,768 530 1,900 150 License fees Kevin bought the vehicle in 2005 for 25,000. UCC of the beginning of the year was 15,300. In 2005, Kevin lent his nephew $50,000. Nephew was laid off from his job and was thinking about starting his own company, but instead used these funds to buy a car and pay for education. Unfortunately, his nephew was never able to repay him and recently had to declare bankruptcy, which included Kevin's loan. There are no hard feelings, he says, but he would like to use that against the capital gain if he could. His former tax adviser referred to something called "ABIL". Required: Part A (35 marks) In Excel, calculate Kevin's 2021 Net Income for Tax Purposes, Taxable Income and Federal Tax Payable or Refund and explain to him why you excluded any of the above information from your calculations. With regards to reassessment, determine next steps and what additional information you require before discussing the merits of the disputed items. Part B (12 marks) Complete a T1 Tax return. When done, go to form "2.T1", section "Step 7: Refund or balance owing", and override Provincial or territorial tax amount with a zero (if there is a provincial tax) as this case asks you to calculate federal taxes only.
Expert Answer:
Related Book For
Personal Financial Planning
ISBN: 9780357438480
15th Edition
Authors: Randy Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Posted Date:
Students also viewed these accounting questions
-
Jason was an employee of Eric and was using his own car to deliver manufactured goods to a client. Since the client was in North Vancouver, the same area where Jasons girlfriend lived, Jason took...
-
Kim Clark has asked you to help him determine the best ordering policy for a new product. The demand for the new product has been forecasted to be about 1,000 units annually. To help you get a handle...
-
Your brother has asked you to help him with choosing an investment. He has $7,800 to invest today for a period of two years. You identify a bank CD that pays an interest rate of 0.0500 annually with...
-
Differentiate f(x) = log 10 (2 + sin x).
-
Greenbelt Hospital has the following activities in its value chain of providing service to each inpatient admission: 1. Schedule patient. 2. Verify insurance. 3. Admit patient. 4. Prepare patients...
-
Match the following terms with their definitions: Auditor a. A preloaded credit card is used to pay employees. b. The process of gathering information about hours worked for one or more employees. c....
-
A beam of protons enters the network of five chambers shown in Figure P27.56 with an initial speed of \(300 \mathrm{~m} / \mathrm{s}\) and moves through the network along the path indicated by the...
-
Using the same data presented above in BE18-3 for Goody Company, illustrate vertical analysis. Using the following data from the comparative balance sheet of Goody Company, illustrate...
-
a) i] Define the term management? [1 marks] ii] Managers must have specific skills and play certain roles in organizations if they are to inspire employees to meet organizational objectives; explain...
-
TourneSol Canada, Ltd. is a producer of high quality sunflower oil. The company buys raw sunflower seeds directly from large agricultural companies, and refines the seeds into sunflower oil that it...
-
Suppose a bond with a three-year maturity, par value of $1 000, and a coupon rate of 4%. We assume the bond makes annual coupon payments, and inflation turns out to be 2%, 3%, and 1% in the next...
-
The mean finish time for a yearly amateur auto race was 185.13 minutes with a standard deviation of 0.353 minute. The winning car, driven by Perry, finished in 184.77 minutes. The previous years race...
-
Carriage inwards is charged to the trading account because (A) It is an expense connected with buying goods (B) It should not go in the statement of financial position (C) It is not part of motor...
-
log 2 5 = k Change each logarithmic expression to an equivalent expression involving an exponent.
-
IQ Test Scores in an IQ test have a bell-shaped distribution with a mean of 100 and a standard deviation of 19. (a) What percentage of people has an IQ score between 62 and 138? (b) What percentage...
-
Clarissa has just completed her second semester in college. She earned a grade of B in her 4-hour linear algebra course, a grade A in her 2-hour government course, a grade of D in her 3-hour physics...
-
Downhill Manufacturing produces snow skis in a two-step production process - cutting and laminating. The manufacturing center is supported by two service centers - a health clinic and a janitorial...
-
Saccharin is an artificial sweetener that is used in diet beverages. In order for it to be metabolized by the body, it must pass into cells. Below are shown the two forms of saccharin. Saccharin has...
-
Scarlett and Damon Mitchell are a high-net-worth couple. They have appropriate auto and homeowners insurance but are concerned that they could be sued by someone visiting or working at their home....
-
Timothy Lawrence plans to borrow $5,000 and to repay it in 36 monthly installments. This loan is being made at an annual add-on interest rate of 7.5 percent. a. Calculate the finance charge on this...
-
Jared Nguyen is an operations manager for a large manufacturer. He earned $110,000 in 2019 and plans to contribute the maximum allowed to the firms 401(k) plan. Assuming that Jared is in the 24...
-
How might planning in a not-for-profit organization such as the World Wildlife Fund differ from planning in a for-profit organization such as Airbnb?
-
Provide examples of the sources of data a residential solar panel company might gather when engaging in environmental scanning. Exhibit 8-6 may be helpful when answering this question.
-
Should (a) large, (b) small, and (c) not-for-profit organizations analyze their organizations internal and external environments differently? Why or why not?
Study smarter with the SolutionInn App