Question:Ms. Anita Brock is a marketing executive employed by a Canadian public company with a December 31 year end. Her base salary for 2018 is $142,000. She also earned $36,000 in commissions and was awarded a bonus of $42,000 for outstanding performance during the year. The bonus will not be paid until December 1, 2019.
Her employer withheld the following amounts from her base salary:
RPP Contributions $5,900
Professional Association Dues 1,500
Life Insurance Premiums 1,100
Group Disability Insurance Premiums 260
Anita’s employer makes matching contributions to her RPP, her life insurance policy, and group disability insurance plan. The disability plan was introduced in 2017 and Anita’s premiums for that year were $240.
Her employer provides her with an allowance of $2,500 a month in order to cover her travel costs, including the use of her personally owned automobile. The automobile was purchased for $28,500 in 2017 and, during that year, was used 70 percent for employment related activities. In 2018, her employment related use of the vehicle increased to 80 percent.
Her employer requires her to maintain an office in her home and has provided her with a signed Form T2200. The office occupies 20 percent of the floor space in her home. The 2018 costs of operating this property are as follows:
Maintenance And Utilities $1,800
Property Taxes 7,200
Mortgage Interest 11,400
Other employment related expenditures during 2018 are as follows:
Automobile Operating Expenses $5,400
Airline And Other Transportation 12,300
Client Meals And Entertainment 8,400
Three years ago, Anita’s employer granted her options to buy 1,500 of the company’s common shares at a price of $32 per share. At that time, the shares were trading at $34 per share. During 2018, when the per share price had increased to $41 per share, Anita exercises all of these options. Unfortunately, the company’s earnings started plummeting during the 4th quarter and, based on the possibility of further declines, Anita sold the shares for $31 per share in December.
In 2018, Anita was off work for three weeks due to a surgical procedure. During this period, the group disability plan provided benefits of $2,000 per week.
Anita is 46 years old and lives with her common-law partner Peaches Lamont. Both women have a child from a previous marriage. Anita’s child Nancy is 12 years old and has no income of her own. Peaches’ child Lex is 14 and is sufficiently disabled that he qualifies for the disability tax credit. Lex has no income of his own. Both children were formally adopted in 2015.
Peaches is 32 years old and attends university on a full time basis for 7 months of the year. Her tuition fees are $9,400. Peaches has agreed to transfer any unused tuition credit to Anita.
During 2018, Peaches receives child support payments of $2,000 per month, along with spousal support payments of $500 per month.
The family’s 2018 medical expenses are as follows:
Anita $ 1,400
Lex (No Attendant Care Costs) 4,600
1. For a number of years, Anita has owned a tract of land with an adjusted cost base of $85,000. While she had hoped to construct a rental property on the land, during 2018 she received and accepted an unsolicited offer of $220,000. The purchaser provides a down payment of $50,000, with the balance payable in 10 annual instalments of $17,000 beginning in 2019.
2. During 2018, Anita receives eligible dividends of $2,200.
3. Anita owns a rare, vintage sailboat that had cost $123,000 when she purchased it 8 years ago. While she was once an avid sailor, her interest has declined over the years and, given this, she decides to rent out the boat to people with advanced sailing skills. Her first charter is on June 1, 2018. On this date, it is estimated that the fair market value of the sailboat is $147,000. Her charter revenues for 2018 total $46,000, while her expenses other than CCA total $13,000. For CCA purposes, she knows that sailboats are in Class 7 and subject to a declining balance CCA rate of 15 percent.
4. At the beginning of 2018, Anita owned 1,500 units of Capital Income Trust. The adjusted cost base of these units at that time was $23 per unit. During 2018, the trust had a distribution of $2 per unit, all of which was property income. Anita had all of this distribution invested in additional units at $25 per unit. In December, 2018, all of her Capital Income Trust units were sold for $27 per unit.
5. Anita owned an antique clock that she sold for $5,000 in 2018. It was a wedding gift from her ex-husband’s parents and its fair market value at the time of the gift was $300. Her ex-husband thought it was tacky and willingly left it with her.
6. Anita makes 2018 contributions to registered Canadian charities of $3,600.
Required: Calculate Anita’s minimum 2018 Net Income For Tax Purposes, her 2018 minimum Taxable Income, and her minimum 2018 federal Tax Payable. Ignore provincial income taxes, any instalments she may have paid during the year, any income tax withholdings that would be made by her employer, and GST/HST/PST considerations.