Homework answers / question archive / Owen has come to you after having his 2019 income taxes filed with CRA

Owen has come to you after having his 2019 income taxes filed with CRA

Law

Share With

Owen has come to you after having his 2019 income taxes filed with

CRA. He has additional information about the cottage that he just started renting in 2019 and forgot about a second cottage that he needs to report rental income to CRA.
The following information was provided to you about the cottage ( Assignment #1):
Owen purchased a cottage for the family's use in 2009 for $215,000, of which $65,000 reflects the cost of the land on which the cottage is situated. The family has made some use of the cottage in every subsequent year. Anticipating spending more time in their new and larger city residence, Owen decides to convert the cottage to a rental property. At this time, it is estimated that the fair market value of the property is $235,000, of which $75,000 can be allocated to the land. As Owen plans to take CCA on this property for rental purposes, he does not elect under ITA 45(2) to have the property continue as his principal residence.
The new information he is now providing has to do with the rental of the cottage starting in 2019 as follows:
On March 1, 2019, it is rented for $3,000 per month for the remainder of the year. He has the following expenses:
Advertising $   500.00
Repairs and maintenance      2,500.00
Insurance   1,200.00
Property Taxes   4,800.00
Utilities  10,200.00
Other expenses   2,800.00


In addition, Owen spends $42,000 furnishing the cottage. All the furnishings are Class 8 assets.


The cottage is a class 1 asset. He added a patio to the cottage that cost him $4,950 in materials and labour.


During the year, Owen rented his other cottage at Lake of Bays, Lot 7 for the full year. Owen's monthly rental revenue is $2,000 and he incurred the following expenses:
Insurance $ 2,000.00
Maintenance   3,000.00
Property Tax   3,500.00
Utilities   4,000.00


He purchased a new fridge for $2,000 during the year for the cottage and have decided to claim CCA on the fridge. This cottage has a capital cost of $143,500, of which $43,500 reflects the cost of the land on which the cottage is situated. The UCC at the beginning of 2016 is $93,000 for the building. Owen wants CCA claimed on the building.


Required:


Owen wishes to have his 2019 income tax return amended with this new information. You will need to prepare the T776 statement for both cottages (separate forms) and prepare a T1 adjustment (print the T1 return as instructed at the beginning of this assignment before starting this assignment and upload it as a separate file in the assignment box for assignment 4).