On February $10,2025,$ You, CPA, just met with a new client, Joe Junior. He was referred by one of your existing clients. During the online meeting, you have learned that Joe had recently moved to Saskatoon, Saskatchewan. However, he had some tax issues and would like to engage you for your professional tax advice. Joe had always prepared his own tax returns. However, his $2023$ tax return was reassessed which resulted him owing Canada Revenue Agency $($CRA$)$ $$61,000.$ You gathered all relevant information with respect to this issue $($Appendix I$).$ To avoid any further problem with CRA, Joe would like you to file his $2024$ tax return. However, he would like you to estimate his tax first so he would not be surprised by the final tax balance when the return was finalized. He emailed you on the following day with all the tax information that you had asked for during the online meeting $($Appendix II$).$ Required: $1)$ Draft a memorandum addressing Joe$$s concern regarding the reassessment of his $2023$ tax returns. $2)$ Based on the information given in Appendix II$,$ calculate Joe$$s net income for tax purposes and taxable income for the year $2024.3)$ After further discussion with Joe, you have discovered additional deductions that he is entitled to$.$ Thus, the taxable income has been revised to $$118,480.$ Calculate Joe$$s federal income tax for the year $2024.$ Appendix I $$ Reassessment of $2023$ Tax Return Joe is a marketing manager and both him and his former wife have been working in downtown Toronto since $2021.$ They rented an apartment in the midtown area. However, they still needed to spend at least an hour driving to work. In the beginning of $2021,$ Joe made a pre$-$construction deposit for down payment to purchase a condominium. Due to the extensive delay of completing the construction, Joe finally took possession of the property in April $2023.$ However, Joe immediately sold the unit in June $2023.$ According to Joe, his former wife unfortunately lost her job in the year $2022.$ Furthermore, Joe$$s company was relocated to Barrie Ontario in late $2022.$ As a result, Joe and his wife had moved to Barrie Ontario in December $2022.$ They were renting a townhouse. Joe showed you a copy of the notice of reassessment dated November $1,2024.$ In the notice, it said that the property was owned for less than $12$ months. Thus, CRA reassessed the gain of disposals in the amount of $$120,000$ as business income and disallowed the first$-$time home buyer tax credit. Joe is required to pay tax liability of $$61,000.$ Joe strongly believed that the reassessment was incorrect since he reported the sales of the condominium in his $2023$ tax return, which he filed in the beginning of April $2024,$ and indicated that this unit was his principal residence. Hence, he believed that the gain of $$120,000$ should have been fully exempted. Joe would like to know the reason of the reassessment and asked you to provide a detail explanation with respect to his situation. If CRA$$s assessment is incorrect, Joe would like to know what he should do next. Appendix II $$ Email Regarding $2024$ Tax Return Joe Junior To: CPA@cpafirm.ca Re: Estimation Federal Tax for $2024$ Tax Year February $11,2025,10$:$05$am Hi$,$ Once again, thank you so much for meeting with me yesterday. I am looking forward to your findings regarding my $2023$ tax returns. I honestly think CRA made a big mistake of assessing the gain on the disposition of the condominium as business income. Nonetheless, I will wait for your reply on that matter. Regarding my $2024$ tax return, here is the information that you are looking for: $$ My divorce was finally finalized in January $2024.$ According to the agreement with my ex$,$ I will be paying support payment of $$1,800$ per month starting February $2024.$ That includes $$1,000$ spousal support and $$800$ child support. $$ I have not received my T$4$ slip. However, based on the final paystub for the calendar year $2024,$ it showed the following: o Gross salary: $$140,000$ o Income tax deducted: $$33,500$ o CPP $($enhanced contribution $$838)$: $$4,056$ o Employment Insurance: $$1,049$ o Donation: $$300$ As I mentioned to you yesterday, due to my job requirement, I moved to Saskatoon in midJanuary. My ex$-$wife and my son still live in the townhouse that we rented in Barrie. I drove $2,700$ kilometers $($km$)$ and it took me $3$ days to do so$.$ These are the expenditures that I have noted: o Gasoline: $$415$ o Accommodation $(2$ nights$)$: $$380$ o Meals: $$190($for $3$ days $$ breakfast, lunch and dinner$)$ My company reimbursed me $$4,500$ for the moving expenses that I have incurred $$ I purchased a condominium in Saskatoon. However, there was a slight delay from the seller, so I ended up spending $22$ days in a hotel. It cost me $$155$ per day. I have spent $$1,200$ moving some furniture and personal belongings from Barrie to Saskatoon. $$ The total price of the condominium was $$308,000$ and I needed to pay an additional $$2,000$ of legal fees for purchasing the condominium. Would it be nice if I can deduct the cost of the condo against.....