This is all the information.

1) Barbara Legault operates a full-time law practice in southwestern Ontario. In her spare time, she creates and sells crystal necklaces at various fairs and festivals. In addition, she derives income from various investments and is an art collector. Below are her financial results for 2021.

Net income from law practice	$ 97,000
Income from crystal business	12,500
Gross rents received on rental property	28,000
Operating expenses on rental property before capital
cost allowance Eligible dividends received from public corporations (38%) Interest paid in the year on a loan used to invest in shares	37,000 4,000 2,000
Gain on sale of shares of public corporations	80,000
Loss on sale of shares of a small business corporation	20,000
Loss on sale of shares of a public corporation	14,000

At the end of 2021, the following tax accounts existed:

Net capital losses

7,000

Required:

i) What is Legaults taxable income for 2021?

ii) Compute Legaults Federal Tax Payable before credits

PROBLEM TWO (30 marks)

Charles Court owns and operates the Seacourt Restaurant as a proprietorship. The restaurant has gained a reputation for offering quality food, good service, and moderate prices in a cozy, relaxed setting. It is a distinctive restaurant well known to the people of Winnipeg. Charles often brags about the competence of his bar and restaurant staff and about the efficiency of his kitchen.

Profits in the past year amounted to $180,000 before draws by Charles, who lives modestly and requires only about $70,000 before tax for living expenses. Over the years, he has invested excess profits in public securities, so he has substantial investment income, which in itself puts him in the maximum tax bracket (50%).

Charles has asked you whether he should incorporate. He is aware that incorporation has some advantages but has also read in the newspapers that double taxation occurs when a corporation structure is used.

Required:

i) Outline the benefits that may be achieved by incorporation of this business and provide Charles with information that will help him to understand the relationship between corporations and their shareholders based on the applicable tax rates.

ii) Outline the Advantages and Disadvantages of Incorporation