Miss Muriel comes to you for advice in February, 2021. Last year 2020, was a year of considerable change and turmoil for her. Her job in Waterloo, Ontario, with X Ltd , a Canadian public corporation, was finished because of reorganization of the Company. She had been with this company since 1987. She accepted another job in Brampton, Ontario, but it required her to move there. Her divorce from her former husband became final in 2019. Miss Muriel who was already a single parent of a nine year old daughter decided to adopt a five year old child locally on May 1^st, 2020. By June 2020, after completing her move to her new job, the adoption was finalized. All legal cost related to the adoption totaled $15,400.

Information on receipts and benefits:

Interest on Canadian savings bonds……………………………………………. $ 1,725

Dividends from Resident Corp……………………………………………………….$ 2,000

Disbursements and withholdings:

i. Interest on money paid to buy dividend paying shares………………$ 60

ii. Registered retirement savings plan contributions made on..........$24,500

-February 14^th, 2020 (2019 earned income was $123,000 with a P.A. of $6,000). She had unused deduction room of $10,000.

iii. Costs incurred to move from Waterloo to Brampton:

Gas and direct expenses incurred to move (72 kms) $ 20

Trailer rental to move her belongings $ 75

Cost of shipping remaining household effects $ 2,000

Cost of staying at a hotel ($125) and meals ($55) for 1 day $ 180

(while waiting for her household furniture to be unpacked)

Interest on money borrowed to buy dividend paying shares $ 600

Additional Information:-

1. In Waterloo Miss Muriel had a home and a cottage which was not subject to the division of property at the time of the divorce. When she moved from Waterloo to Brampton in 2020 she sold both properties. She had purchased the home in 2004 for $225,000. She sold the home in May of 2020 for $750,000. The real estate commission paid on this sale was $25,000. The cottage was purchased in 2005 at a cost of $360,000 and was sold in September 2020 for $960,000. The real estate commission on this sale was $30,000.
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3. The T4 slip provided to Muriel for the year 2020 indicates:-

Income Taxes withheld……………………………………..$34,000

CPP & EI…………………………………………………………….    3,499

2. Miss Muriel made donation to the Salvation Army throughout the year amounting to $5,000.

3. She contributed $2,000 to the Democratic Party of the U.S.A. and $2,000 to the Federal Liberal Party of Canada.

APPENDIX #1

2020 Federal Income Tax Brackets

Taxable Income Tax

$48,535 or less………………………………………………………………………..…15%

in excess of $48,535 ………………………………………………………..…………$7,280 *+ 20.5% on next $48,534

in excess of $97,069…………………………………………………………………..$17,229** + 26% on next $53,404

in excess of $150,473……………………………………………………………….…$31,114***+29% on next $63,896

in excess of $214,369………………………………………………………………….$49,644+33% on the remainder

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*Computed as 15%*$48,535=$7,280

**Computed as $7,280 + 20.5% of $48,534 =$17,229 (rounded)

***Computed as $17,229+ 26% of $53,404=$31,114 (rounded)

****Computed as $31,114+29% of $63,896=$49,644 (rounded)

2. Non-Refundable 2020 Tax credits

Dollar Base Rate Threshold

Basic Personal …………………………………………………………………....13,229** 15 $150,473

(If income is above threshold the credit is reduced to $12,298)

Spouse or Equivalent…………………………………………....……………….13,229………… 15……….(13,229 is adjusted by any unused portion of the other spouse’s basic credit)

Canada Caregiver for dependents over 18……………………………….7,276………….15

Canada Caregiver for dependents under 18……………………………..2,273………….15

Age credit………………………………………………………………………….………7,637…………..15…………(adjusted by the lesser of Division B income or &7,637)

Canada employment amount……………………………………………………1,245…………..15

Adoption expense amount………………………………………………………..16,563………..15

Home accessibility tax credit………………………………………Up to…….10,000 ………..15

First time home buyers tax credit......................................................5,000………….15

Volunteer firefighters tax credit…………………………………………………..3,000…………..15

Search and Rescue volunteers tax credit………………………………………3,000……………15

CPP(maximum)…………………………….................................................Amount paid…...15

EI(maximum)………………………………………………………………………………Amount paid...15

Pension………………………………………...................................................2,000 …........ 15

Mental or physical impairment amount…………………………………………..8,576…………15

Tuition amount……………………………………………………….Amount paid(can be transferred to a dependent or spouse)

Medical expenses……………………………………………………Actual Medical Expenses :-

LESS:-Lesser of:-

1. $2,397
2. 3% of Division B Income

Charitable donations………………………………………………..200………………15 then 29% on amounts over $200

Interest paid on student loans………………………………….15% of actual

Dividend Tax Credit………………………....6/11 of grossed up dividends for public corporations with gross up of 38% and 9/13 for CCPC with gross up of 15%

(An election can be made to transfer this credit to a spouse)

Foreign Tax Credit…………………………...Lesser of:-

i. non-business income tax paid to a foreign country

ii. Net non business foreign income

divided by total Division B income times

This number times tax for the year for Part 1 taxes

Contribution Credit

$400 or less………………………………………………….......…75% of contribution

More than $400 but not more than $750................$300+50% of contribution over $400

More than $750, but not more than $1275…….…. $475+one-third of contribution over $750

More than $1275…………………………………………………..$650

Any individual can transfer to the spouse any unused credits of:-

i. Tuition

ii. Age

iii. Pension

iv. Mental or physical impairment

v. Child amount

**Basic Personal amount is reduced to $12,298 for a dollar amount over a threshold of $150,473.

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APPENDIX 1 2020 Federal Income Tax Brackets Taxable Income x 48535 or less 15 in ... View the full answer