Mr. Armstrong has provided you with the below information. Please determine Mr. Armstrong’s net income for tax purposes (Division B income) in 2020 as a result of the information. Show all of your calculations.

 He sold his existing home and his cottage during the year and moved into a condominium. His home was purchased in 2004 at a cost of $85,000. He sold it in September 2020 for proceeds of $250,000. He paid real estate commission of $12,000 on this sale. His cottage was purchased in 2005 at a cost of $120,000. He sold it in November 2020 for proceeds of $320,000. He paid real estate commission of $10,000 on this sale. He did not own any other residences during the relevant years and, thus, has not previously designated any of the relevant years for purposes of the principal residence exemption.

1. He sold the following personal items during 2020:

	Proceeds	Cost
Antique coat rack......................................................	$ 200	$     1,500
Coin collection......................................................................................	1,200	450
1964 Ford (a collector’s item)......................................................................................	12,000	7,000

3. He owns two rental properties. Rental revenue and allowable expenses (excluding capital cost allowance) from the two Class 1 buildings are as follows:

			Rental #1	Rental #2
Gross rental revenue................................................................................. ...............................................................................			$25,000	$  15,000
Expenses:
Mortgage interest..........................................................................			—	(25,000)
Property taxes..........................................................................			(3,000)	(3,500)
Insurance..........................................................................			(2,000)	(2,400)
Maintenance..........................................................................			(8,000)	(1,500)

We also know the following information for the two rentals:

	Rental #1	Rental #2
Capital cost..............................................................	$ 400,000	$ 500,000
UCC January 1st 2020 ......................................................................................	350,000	400,000

4. On October 1^st, 2018, He purchased a $ 50,000 GIC three-year GIC that pays 4% interest per compounded yearly. No interest is received until the maturity date of the GIC on September 30^th, 2021. 

Answer rating: 100% (QA)

SOLUTION 1 GAIN ON SALE OF HOME 25000085000 165000 SALE OF COTTAGE 230000120000 110000 SALE ... View the full answer