Mr. I.M. Yours formally separated from his wife on January 1, 2020. Custody of his four (4) children, aged 18, 13, 12 and 11, was given to him as part of an agreement worked out with his wife in family court. To make a fresh start, effective March 31, 2020 he resigned his position in Toronto, where he had been employed by the same employer since 1984 and took a position in Kanata, Ontario. In previous years he had always prepared his own tax returns but because of the extraordinary events of 2020, he was having difficulty with the calculation of his income and whether he had income tax payable or was eligible for a refund. He has come to you for help with these calculations.
The following amounts are the combined total from both employers (Kanata and Toronto). Salary was $75,000. The employers paid his group life insurance premiums totalling $550 in 2020. In addition, in 2020 Mr. Yours contributed $5,100 into his employers’ registered pension plans. During the year, the employers withheld Canada Pension Plan contributions of $2,749 and Employment Insurance premiums of $860.
Mr. Yours also owned an apartment building. During the year he incurred a net rental loss of $4,500. He also earned $9,100 interest from Canada Savings Bonds and received dividends of $905.80 from a Canadian public corporation. Mr. Yours does not have a Tax-Free Savings Account. To buy the shares of the public corporation he borrowed $10,000 on his line of credit from the bank and during the year he paid $250 in interest on that loan.
Mr. Yours also sold some shares of XYZ Corporation which he purchased for $200,000 in 2016 and sold for $212,000 in 2020. In 2020 he also sold a cottage he owned jointly with his wife and his share of the taxable capital gain on the cottage was $5,500 as it was not the principal residence.
The following is additional information regarding Mr. Yours:
a) He had the following receipts during 2020:
a. A lump-sum payment of $20,000 out of his Registered Pension Plan (RPP) which he transferred directly into a Registered Retirement Savings Plan (RRSP)
b. A retiring allowance of $60,000 from his previous employer (Toronto) for long service.
b) He made the following payments in 2020:
a. RRSP contribution for 2020 was $70,000. His earned income in 2019 was the same as 2020 and his pension adjustment for 2019 was $5,000.
b. Legal fees of $4,500 related to representations in family court regarding his separation, and $1,250 appealing a tax assessment which he lost.
c. Charitable donations of $1,250.
d. He was required to make maintenance payments to his wife pursuant to an agreement made by order of the court. Under the court order he was required to make monthly payments to her for maintenance totalling $8,000 in 2020 and in addition was also required to make monthly payments directly to the owner of her condo apartment totalling $5,000 in 2020.
c) Mr. Yours had a net allowable capital loss of $11,466 in 2006 which he has not used.
d) Mr. Yours’ oldest child, Scott, attends Queen’s University in Canada and in January paid $64,000 in tuition fees for eight (8) months of full-time attendance in 2020. Scott earned gross employment income of $2,500 during the summer. No deductions were taken from Scott’s pay.
e) Mr. Yours’ other children do not have any income.
Required:
Calculate Mr. Yours:
- Subdivision a, b, c, d, and e amounts separately (i.e., Income or Loss from an Office or Employment; Income or Loss from a Property; Taxable Capital Gains and Allowable Capital Losses; Other Sources of Income; and, Deductions in Computing Income, respectively).
- Net Income for Tax Purposes (Division B)
- Taxable Income (Division C)
- Federal Tax Payable. (Division E)
