Taxation

Mr. Alec Trevelyan lives in Kamloops, British Columbia. He is 42 years old. His wife Naomi is 40 years old and, for 20XX, she has Net Income for Tax Purposes of $8,000. They have two children. Their daughter Rhoda is 16 and has income from part time jobs of $1,200. Their son Mitchell is 12 and has no income of his own.

Mr. Trevelyan works for a large public company and, during 20XX, his basic salary is $108,000. In addition, he has commission income of $28,180. During 20XX, his employer withheld the following amounts from his earnings:

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Registered Pension Plan Contributions $4,800
Canada Pension Plan Contributions 2,749
Employment Insurance Premiums 860
Donations to United Way 1,800
Union Dues 915
Contributions to Company’s Disability Plan 1,200

Other Information

  1. For the previous year, Mr. Trevelyan’s Net Income for Tax Purposes consisted of: employment income of $103,500 (before the deduction of $4,000 in RPP contributions), interest income of $3,000, and net rental income of $2,500. Tax-free savings account (TFSA) contributions of $3,000 and registered education savings plan (RESP) contributions of $4,000 were also made in the previous year.
  2. At the end of the previous year, Mr. Trevelyan’s unused RRSP deduction room was $7,100; he had $3,000 undeducted contributions, and his employer reported that he had a pension adjustment of $8,200.
  3. Mr. Trevelyan’s employer made a $4,200 contribution to the company’s RPP. The employer also reported a past service pension adjustment of $1,485 during the current year.
  4. Mr. Trevelyan’s employer makes a matching $1,200 contribution to the company’s disability plan on behalf of Mr. Trevelyan. The comprehensive disability plan provides periodic benefits during any period of disability to compensate for lost employment income. Due to a sick leave in 20XX, Mr. Trevelyan received disability benefits of $8,750. Mr. Trevelyan has been making a $1,200 contribution in each year for the last 5 years (including the current year) and has had no previous benefit claims.
  5. Mr. Trevelyan was the top salesperson in the office and received an award of an all-expense paid trip to Costa Rica in 20XX. The cost of the trip was $3,200 and, in addition, Mr. Trevelyan was provided with $1,000 for incidental expenses on the trip.
  6. Mr. Trevelyan is required to maintain an office in his home without reimbursement from his employer. His employer provides the required T2200 form. He uses 10 per cent of the home’s floor space for his office. The costs for his home are as follows:
    Utilities and Maintenance $5,000
    Insurance 4,500
    Property Taxes 7,600
    Mortgage Interest 9,600
  7. Mr. Trevelyan receives a travel allowance of $5,100 per year to cover his hotel costs. His actual hotel costs for 20XX were $5,150 and, in addition, he spent $5,350 on business meals and entertainment. His employer does not reimburse these costs.
  8. As with all of the other employees, Mr. Trevelyan received a $500 gift certificate for use at a local department store.
  9. Mr. Trevelyan has capital gains and capital losses from stock market trading. His gains included $10,000 from the sale of Microsoft shares on January 20, $8,000 from the sale of Apple shares on March 24, and $5,000 loss from the sale of Teck shares which he sold on August 1. He has incurred a total of $1,350 in commissions for the sale of these three stocks. He regretted the sale of Teck shares and purchased the same number of shares back on August 29 of the same year.
  10. During the year, Mr. Trevelyan also sold a collectible figurine that was given to him when he was a child. While it had only cost his parents $500, it had increased significantly in value. It was sold through a local antique store for $4,500. The store charged a commission of $450.
  11. Mr. Trevelyan has a net rental loss of $6,000 from a residential rental property.
  12. Mr. Trevelyan earned $8,600 in net business income from creating websites for local businesses.

Required

Ignore GST considerations in making your calculations.

  1. Calculate Mr. Trevelyan’s maximum deductible RRSP contribution for 20XX. (20 marks)
  2. Assume that Mr. Trevelyan contributes the amount calculated in Part A to his RRSP. Calculate Mr. Trevelyan’s 20XX net employment income. (30 marks)
  3. Calculate Mr. Trevelyan’s Net Income for Tax Purposes and Taxable Income. (25 marks)
  4. Calculate Mr. Trevelyan’s Federal Tax Payable before consideration of any income tax that would have been withheld or paid in instalments. (25 marks)

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