Traci works evenings and weekends as a computer consultant. Weekdays she is employed full-time as a network administrator with Jimac Distributors Ltd., a Canadian-controlled private corporation. Traci has an office organized for her consulting business in her four-room condominium where she takes care of paperwork as well as the assembly and repair of computers. This room is the smallest in the condominium taking up only 50 m2 of the 400 m2 total space. The following information was provided by Traci.
Receipts for condo fees.................................... $ 1,800
Mortgage interest..............................................5,250
Receipts for utilities (light, heat, water)......................800
Telephone bills...................................................600
Deductible CCA on computer equipment used for Diagnostic purposes..........................................................1,500
The telephone is used personally and for business. Long distance bills for business total $250. All consulting revenues are deposited into her personal account but she keeps a record in her consulting journal. All payments for supplies are paid out of her personal bank account. She provided you with the following information from her cheque book.
Money received for consulting services.................. $ 35,000
Cheques issued:
Comp World for parts..........................................18,000
Computer Association............................................. 50
Savoir Faire cocktail party for clients........................... 300
Future Shop for a television and DVD player.................. 200
Straw Warehoue for living room furniture.....................5,500
Computer World magazine subscription........................ 80
Notes:
(a) By looking at Traci's last year's tax return, you notice she claimed a reserve of $500 for amounts not collected. This year, $1,200 is outstanding on doubtful customers' accounts. Traci's records indicate that she was unable to collect $300 for two jobs completed last year.
(b) At the beginning of the year, Traci had $1,500 worth of parts. At the end of the year, she held an inventory of SIMMS that had dropped drastically in price; while the original cost was $2,000, the replacement cost is only $1,200.
(c) Traci often travels to a customer's place of business to provide training, installation, and Home Page design services. Traci uses her own car and charges the customer an extra $50 (included in consulting services) for the on-site service. Assume that Traci's capital cost allowance is $600. Traci kept track of her receipts and the kilometres she drove during the calendar year.
Total kilometres driven.............................15,000
Kilometres for business............................. 4,500
Gas and oil......................................... $ 1,500
Repairs (tires and muffler) ....................... $ 350
REQUIRED
Calculate Traci's income from business for tax purposes.