Tax Software Assignment Problems

Solutions to Tax Software Assignment Problems are available to instructors only.

Tax Software AP 4-1

This problem is continued in Chapter 11 with Tax Software AP 11-1 (Chapter 11 is

in Volume 2).

DISCLAIMER: All characters appearing in this problem are fctitious. Any resemblance to

real persons, living or dead, is purely coincidental.

Mr. Buddy Musician (SIN 527-000-061) was born in Vancouver on August 28, 1955. He has spent

most of his working life as a pianist and song writer. He and his family live at 111 WWW Street,

Vancouver, B.C. V4H 3W4, phone (604) 111-1111.

Mr. Musician's wife, Natasha (SIN 527-000-129), was born on June 6, 1997. She and Mr. Musician

have six children: four biological and two adopted. Each biological child was born on April 1 of the

following years: Linda, 2017; Larry, 2018; Donna, 2019; and Donald, 2020. None of these children

have any income of their own for 2022. Natasha's only income in 2022 is $3,200 from singing

engagements.

Buddy and Natasha's son Richard (SIN 527-000-285) was born on March 15, 2005, and has net

income of $2,800 for the year. Due to his accelerated schooling, he started full-time attendance

at university in September 2022 at the age of 17. His frst semester tuition fee is $3,000. These

amounts are paid by Mr. Musician.

Their other child, Sarah, was born on September 2, 2002, and was in full-time attendance at Their other child, Sarah, was born on September 2, 2002, and was in full-time attendance at univer-sity for all of 2022 (including a four-month summer session). Her tuition is $9,600. These amounts

are also paid by Mr. Musician. Sarah has no income for 2022.

Neither Richard nor Sarah will have any income in the next three years. They both have agreed that

the maximum tuition amount should be transferred to their father if it is benefcial.

Mr. Musician's mother, Eunice, was born on April 10, 1935, and his father, Earl, was born on Novem-ber 16, 1933. They both live with Mr. Musician and his wife. While his father has some mobility

issues, he is not infrm. His mother is legally blind. Eunice Musician had net income of $9,500 for

the year, while Earl Musician had net income of $7,500.

Other information concerning Mr. Musician and his family for 2022 is as follows:

1. Mr. Musician earned $16,500 for work as the house pianist at the Loose Moose Pub. His T4 showed

that his employer withheld $500 for income tax and $280.70 for EI. No CPP was withheld as he had

previously fled an election to stop contributing to the CPP on January 2, 2021.

2. During the year, Mr. Musician made his annual $3,000 donation to Planned Parenthood of

Canada, a registered Canadian charity

3. Mr. Musician has been married before to Lori Musician (SIN 527-000-319). Lori is 52 years old

and lives in Fort Erie, Ontario.

4. Mr. Musician has two additional children who live with their mother, Ms. Dolly Nurse (SIN 527-000-582), in Burnaby, British Columbia. The children are Megan Nurse, aged 12, and Andrew

Nurse, aged 14. Neither child has any income in 2022. While Ms. Nurse and Mr. Musician were

never married, Mr. Musician acknowledges that he is the father of both children. Although he

has provided limited fnancial aid by paying their dental and medical expenses, the children are

not dependent on Mr. Musician for support.

5. Mr. Musician wishes to claim all his medical expenses on a calendar-year basis instead of

a random 12-month period. On December 2, 2022, Mr. Musician paid dental expenses to

Canada Wide Dental Clinics for the following individuals:

Himself $1,200

Natasha (wife) 700

Richard (adopted son) 800

Sarah (adopted daughter) 300

Linda (daughter) 100

Earl (father) 1,050

Lori (ex-wife) 300

Dolly Nurse (mother of two of his children) 675

Megan Nurse (daughter of Dolly Nurse) 550

Total $5,675

6. Mr. Musician signed a contract with Fred Nesbitt on January 13, 2022, to make permanent

modifcations to his house. The contract was for the installation of ramps with sturdy hand

railings outside his front and back doors to give his parents easier access to the house and

modifcations to their bathroom so they would be less likely to fall when using the shower.

The contract price was $5,800. As neither of his parents has a severe and prolonged mobility

impairment, these expenditures are not eligible medical expenses.

7. Mr. Musician paid four quarterly instalments of $1,000 each (total of $4,000) for 2022, as

requested on his instalment reminders from the CRA. He paid each instalment on the due

date.

8. Assume that Mr. Musician has not applied to receive either OAS or CPP benefts.

9. Mr. Musician authorizes his tax preparer to provide information to Elections Canada. In addition,

he did not own, at any time in 2022, specifed foreign property in excess of C$100,000 nor did

he own shares in a foreign affliate. Finally, he did not dispose of a principal residence in 2022.

Required: With the objective of minimizing Mr. Musician's income tax payable, prepare Mr. Musi-cian's 2022 income tax return using the ProFile tax software program assuming Natasha does not

fle an income tax return. List any assumptions you have made and any notes and tax planning

issues you feel should be placed in the fle.