Ms. Jezebel Forest is 67 years old and has been married to Bernard Forest, for over 40 years. She has never applied for OAS as she knows that, for the foreseeable future, it will all be clawed back. In addition, she has not applied for CPP as she is aware that deferring the application will result in larger benefits. She continues to make contributions towards the CPP.

 

She has been employed by several organizations over her working life and, during 2021, she received pension income from various RPPs totaling $ 4,000 per month.

 

Currently, she is a full-time employee of Dartmor Enterprises Ltd. with an annual salary of

$ 71,500. The Company withheld $ 40,000 re federal income tax. Dartmor made the following payroll deductions:

 

      RPP Contributions                                                 $2,500

      EI Premiums                                                               890

      CPP Contributions                                                   3,166

      Union Dues                                                                 336

      Donations to Registered Charities                           1,800

 

Jezebel's spouse, Bernard Forest, is 69 years old and had 2021 net income of $ 15,200. This consisted of pension income from his RRSP and OAS payments. He has not applied for CPP.

 

The couple have two children. Their 42-year-old daughter Samantha has been blind since an automobile accident when she was a teenager. She lives with Jezebel and Bernard, is totally dependent on them, and has no 2021 net income.

Their 44-year-old son Norman has had a long history of substance abuse. However, he is currently living with Jezebel and Bernard and is in a rehabilitation program that seems to be working. The program provides him with a monthly income of $ 2,000, conditional on his staying enrolled in a university program leading to an accounting degree. During 2021, he attends university on a full-time basis for 10 months. His tuition fees were $ 11,300 and he had textbook costs of $ 1,100. Jezebel paid all of these costs and Norman had agreed to transfer the maximum education related credits to her. Norman's only tax credits are the basic personal amount and any education related credits.

 

During 2021, Jezebel received the following dividends (all amounts in Canadian dollars):

 

Eligible Dividends from Taxable Canadian Corporations                                         $ 15,400

Non-Eligible Dividends on shares in her sister's CCPC                                             2,600

Dividends on foreign shares - 15% foreign income taxes are withheld                     16,000

Total Dividends Received                                                                                          $34,000

 

In addition to dividends, Jezebel had 2021 interest income of $ 1,456.

 

The family's medical expenses, all of which have been paid by Jezebel, were as follows:

 

Jezebel                                                                           $ 450

Bernard                                                                          1,475

Samantha                                                                     11,400

Norman                                                                          8,470

Total Medical Expenses                                            $21,795

 

Jezebel also carried on a management consulting business which she started in 2018 as a sole proprietor. In that year, she purchased a new building to be used exclusively as an office for this business. The building cost $ 383,000, of which $ 112,000 is attributable to the land on which the building is situated and $ 271,000 to the building. On January 1, 2021, the UCC of the building was $ 232,272. This is the only building owned by Jezebel other than her principal residence.

 

When she purchased the building in 2018, she also purchased office furniture and fixtures at a cost of $ 18,500. On January 1, 2021, the UCC of the class is $ 10,656.

 

During 2021, Jezebel spends $ 23,500 in improvements to the building and $ 24,500 on new furniture and fixtures. The older furniture and fixtures were sold for $ 6,200.

 

As the business has expanded, on January 1, 2021, Jezebel purchased an automobile to be used exclusively in the business. The cost of the automobile was $ 41,500, all of which was financed with a bank loan. During 2021, interest charges on the bank loan totaled $ 4,980, all of which was deducted in determining the cash flows from the business. The 2021 operating costs for the automobile totaled $ 5,600.

As Jezebel had no reason to keep detailed accounting records, she recorded business income on a cash basis. For 2021, her net cash flow from the business was $ 96,400. Relevant amounts for the beginning and end of 2021 were as follows:

 

                                                                               January 1  December 31

Billed Receivables                                                      $ 8,400          $ 11,250

Unbilled Work in Process                                            12,600             18,400

Accounts Payable                                                          6,240               7,485

 

Required: Calculate Jezebel Forest's 2021 minimum net income, taxable income and federal income tax payable. Ignore GST/HST & PST considerations and the possibility of pension income splitting.

Answer rating: 100% (QA)

To calculate Jezebel Forests 2021 minimum net income taxable income and federal income tax payable we need to consider various sources of income deductions and credits Lets calculate each component st... View the full answer