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Question 16 Mabel is a Canadian citizen who has been employed in Vancouver for the last five years

Taxation

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Question 16

Mabel is a Canadian citizen who has been employed in Vancouver for the last five years. She has accepted a new position in the United States and, as of March 15 of the current year, flies to New Mexico to assume her responsibilities. She has been granted a green card to enable her to work in the U.S. Her husband remains behind with the children until July 1, after the end of their school year. On that date, they fly to New Mexico to join Mabel. Their residence is sold on August 1 of the current year, at which time a moving company picks up their furniture and other personal possessions. The moving company delivers these possessions to their new house in New Mexico on August 15. Explain how Mabel will be taxed in Canada during the current year.

Question 17

Carol had employment income of $126,100, as well as income from an unincorporated business of $14,100. A rental property owned by Carol experienced a net loss of $4,600. Dispositions of capital property during the current year had the following results:

           Capital Gains                                                      $56,400

           Capital Losses                                                       72,300

In compliance with the terms of his divorce agreement, Carol paid deductible spousal support of $600 per month for the entire year. In addition to the preceding items, Carol had a winning lottery ticket which resulted in his receiving a prize of $562,000.

Required: Calculate Carol's Net Income For Tax Purposes (Division B income). Indicate the amount and type of any loss carry overs that would be available at the end of the current year.

Question 18

In this case which follow, assume that Ben Bayley's combined federal and provincial Tax Payable is as follows:

       2018                                                    $14,256

       2019                                                      15,776

       2020 (Estimated)                               16,483

The amount Ben's employer withholds is as follows: $14,920 in 2018, $11,400 in 2019, and $13,226 (estimated) in 2020.

Required:

A.   For this case:

• indicate whether installments are required for the 2020 taxation year;

• if installments are required, calculate the amount of the installments that would be required under each of the three acceptable methods; and

• if installments are required, indicate which of the three acceptable methods would be the best alternative.

B.   Indicate the dates on which the payments will be due.

Question 19

Caryon Inc. provides an automobile to Ms. Rose Smart for her to use in carrying out her employment duties. Ms. Smart is given full possession of the car and is allowed to use it for personal needs. However, when she is not using it for employment or personal activities, it must be returned to Caryon's premises so that it can be used by other employees.

The automobile was purchased in 2018 for $42,000 and, during the years 2018, 2019, and 2020, the Company has deducted maximum CCA.

Ms. Smart has use of the car for 10 months of the year. Personal use during the year totals 23,000 kilometers.

During 2020, Ms. Smart drove the car 48,000 kilometers, with the Company paying for all of the operating costs. These costs totaled $9,850 during the year.

Required:  Ignore all GST/PST/HST implications. Indicate the minimum taxable benefit that would be allocated to Ms. Smart.

Question 20

Fabric Ltd. has a taxation year which ends on December 31. On January 1, 2020, the Company had 10 assets in Class 10. The January 1, 2020 balance in this Class was $83,400. The capital cost of these 10 assets was $110,000. Subsequent transactions during the year are as follows:

• On May 1, 2020, all of the original Class 10 assets are sold for $92,400.

• On June 1, 2020, 10 new assets are acquired at a cost of $105,000.

• On December 1, 2020, the 10 new assets are sold for $65,000.

On December 31, 2020, no assets remain in Class 10. What is the effect of these transactions on the Company's 2020 net business income? In addition, determine the January 1, 2021 UCC balance

Question 21

On January 1, 2020, Mr. Peters receives a $135,000 loan from his employer to assist him in purchasing a home. The loan requires annual interest at a rate of 3.1 percent, which he pays on December 31, 2020. Assume that the relevant prescribed rate is 5 percent during the first quarter of 2020, 6 percent during the second quarter, and 4 percent during the remainder of the year. What is the amount of Mr. Peter's taxable benefit on this loan for the year?

Question 22

During January, 2018, Lastech Inc. issued options to their employee, Ms. Marianne Black. The options allowed Ms. Black to acquire 1,500 of the Company's common shares at an option price of $23 per share.

At the point in time when the options were exercised, the fair market value of the shares was $25 per share. All of the shares that are acquired through the options are sold on December 31, 2020 at a price of $28 per share.

Lastech Inc. is a Canadian controlled private corporation. At the time the options were granted, the Company's shares had a fair market value of $23 per share. The options were exercised on July 1, 2019.

Required: Indicate the tax effect on Ms. Black of the transactions that took place during 2018, 2019, and 2020 under each of the following independent Cases. Your answer should include the effect on both Net Income For Tax Purposes and Taxable Income. Where relevant, identify these effects separately.