Mr. Jack Leonard has asked you to assist him in preparing his 2020 tax return. To this
Question:
Mr. Jack Leonard has asked you to assist him in preparing his 2020 tax return. To this end, he provides you with the following information.
Mr. Leonard's employer is a large, publicly traded corporation. During 2020, Mr. Leonard received a gross annual salary of $58,000, living accommodations having a fair market value of $3,000 per month, and an award of $2,100 in recognition of outstanding job performance. The accommodations that were provided were not located in a remote region or prescribed zone. Awards for performance are paid instead of investing in employee benefits, so there is no pension plan and Mr. Leonard's 2019 Pension Adjustment amount is nil. His employer withheld the maximum for CPP contributions and EI premiums.
On August 1, 2020, his employer granted him an option to purchase 100 of its shares at a price of $7 per share. The market price of the shares at that time was $7 per share. On December 1, 2020, the market price of the shares had increased to $16 per share. On that date, Mr. Leonard exercises his option and purchases the 100 shares. He is still holding the shares on December 31, 2019.
Mr. Leonard provides the following list of receipts and disbursements for the 2020 taxation year:
Receipts
Director's Fees $ 1,300
Royalties on Patent Purchased In 2010 24,070
Bond Interest 430
Disbursements
RRSP Contribution on July 6, 2019 $16,000
Rent Paid To Employer for Living Accommodation 12,000
Financial Support of His Aunt 7,100
You ascertain that his aunt is physically infirm, is wholly dependent upon Jack Leonard for support, had income of $3,000 during the year, and lives in Florida for health reasons.
Mr. Leonard provides you with the following information on his dispositions of property during the year:
Proceeds Cost
Diamond Ring $1,200 $ 950
Painting 1,100 1,800
Pistol Collection 2,000 1,400
On further enquiry, you learn that he is married and has one 19 year old son. Mr. Leonard's wife had income of $2,990 during the year.
His son lives at home and was employed during twelve weeks of the summer at a golf course as a greens keeper, at a salary of $250 per week. In September, he left his employment to commence full time studies at university. Tuition fees paid for the 2020 calendar year amounted to $4,860 and were paid by Mr. Leonard. The son's only other source of income was $700 in interest on bonds received from his father as a birthday gift in 2009. He will transfer any unused tuition credit to his father.
Assume Mr. Leonard's 2019 Earned Income for RRSP purposes was equal to his 2020 Earned Income. At the beginning of 2020, Mr. Leonard has no unused deduction room or undeducted contributions.
Required:
For 2020, compute the following amounts for Mr. Leonard:
A. Net employment income.
B. Income from property.
C. Net taxable capital gains.
D. Net Income For Tax Purposes.
E. Taxable Income.
F. Federal Tax Payable.
Show all required calculations, including those necessary to determine the maximum RRSP deduction for the year. In addition, indicate any available loss carry over amounts and the applicable loss carry over provisions.
