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It is now March 1, 2024.  You, CPA, will be meeting with a new...

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It is now March 1, 2024.  You, CPA, will be meeting with a new...

It is now March 1, 2024.  You, CPA, will be meeting with a new client, Andrew Yang.  Andrew requested you to prepare his 2023 personal tax return.  


 

After a meeting with Andrew, you have obtained the following information:
 


 

1) Andrew was employed in a public corporation since 2015.  For the calendar year 2022, his gross employment income was $135,000. The following amount was deducted:
 

 

  • income tax: $43,000
     
  • donation to local Charities: $300
     
  • Registered pension plan: $3,000
     

 

 

2) Andrew was provided a company car at the beginning of the year.  The Company paid $40,000 (including tax) for the car.  During the year, he drove a total of 20,000km, of which 70% were for employment purposes.  The employer paid all of the operating cost, which totaled $4,300.

 

3) Andrew received the following from his investment:

 

  • $1,200 of eligible dividend from taxable Canadian-controlled private corporations (which the income was subject to small business deduction);
     
  • $2,000 of dividend from a taxable Canadian public corporation; and
     
  • $1,800 of foreign dividends.  The $1,800 is the net amount after the foreign country withheld $350 in foreign tax.
     
  • $4,300 (net of tax $200) of foreign interest
     

 

 Andrew paid $500 as investment fee

 

4) Andrew purchased a $100,000 bond on its issue date, October 1, 2022.  The bond pays interest 5% compounded annually.  Andrew told you that he has not reported any interest income yet since the interest will be fully paid when the bond matures on September 30, 2027.

 

5) During 2023, Andrew disposed many of his personal properties.  He provided you the following listing of the items that were sold:

 

Item

Proceed

Cost

A limited edition of an old camera

$1,300

$800

Stamp collection

$6,500

$1,200

Furniture

$800

$5,300

Clothing

$200

$800

Jewelry

$850

$400

 

6) Andrew has 2 rental properties.  For the year 2023, the rental income was $33,500.  The rental expense (such as maintenance, interest, etc) were $18,800. 
 

During 2023, Andrew needs to refinance the mortgage for property #2 which he incurred cost of $2,000.

He has been taking CCA deduction against his rental income.  He has provided you with the following information:
 

 

Cost

UCC 

(as of Dec 31, 2022)

Rental Property #1

$250,000

$188,000

Rental Property #2

$260,000

$155,000

In December 2023, Andrew sold Property #1 for $400,000

 

7) Andrew informed you that he bought 20% shares of a small business corporation for $16,000. However, the company filed bankruptcy in 2023 and Andrew was not able to recover any of her investment.

 

8) Andrew bought a condominium for $540,000 on September 1, 2022.  He has been living there ever since.  However, he decided to sell the condominium on May 31, 2023 for $700,000. He used the proceed to purchase another condominium in the same area.

 

Required:

Calculate Andrew's net income for tax purposes for the 2023 taxation year in accordance with the aggregating formula of Section 3 of the Income Tax Act. (40 marks)

 

Note: You are required to show your work in order to earn full marks but you are not required to reference legislation in Income Tax Act

Answer & Explanation

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Answered by diazzand93 on coursehero.com

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