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You have been presented with some tax information from your client, Tandiwe Okara,

INSTRUCTIONS TO CANDIDATES
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Comprehensive Individual Case Assessment

 

You have been presented with some tax information from your client, Tandiwe Okara, who asked for your advice in determining both her 2022 taxable income and taxes payable. As the filing requirements are urgent, you will need to have her file completed by the filing deadline.

 

Purpose of the Assignment

The purpose of the assignment is to incorporate the following elements:

 

1. Application of course concepts, Canadian Income Tax legislation, and court rulings to real- world taxation issues and scenarios.

2. Further development of analytical, problem-solving, professional judgment, and written business communication skills.

3. Increased working knowledge of Excel worksheet preparation.

 

General Requirements and Assumptions

You are required to determine Tandiwe Okara’s Net Income for Tax Purposes by providing a breakdown of the various categories of income according to the Ordering Rules in Section 3 of the Income Tax Act. In addition, taxable income and taxes payable must also be determined using the information provided. The results must be communicated in a one-page memo addressed directly to your client.

 

Word document - instructions

Attractive Cover Page (File Cover) for your report (to be presented to your client – be creative if you wish).

Contents - a one-page memo to your client outlining the net results of your review. You will need to provide specific details that you feel will help your client gain a better understanding of how taxes payable were determined (i.e., items and/or events the client may question). You will need to identify the total taxes owing and address key taxation issues that may be relevant to your client in the current and future taxation years. Remember, your client may not have a good understanding of the Income Tax legislation, so keep this in mind when preparing your memo. A sample memo format has been provided in Canvas.

 

Excel worksheet - instructions

The Excel worksheets are required for organizing your client’s net income for tax purposes, taxable income, and taxes payable calculations according to the relevant provisions.

All your planning assumptions are to be in one workbook (in a single Excel file.)

Do not place more tables on any one worksheet than can be printed attractively on a single page. You will probably use several worksheets for your planning assumptions (like tax rates, capital gains rates, etc.).

Change the name on the tabs of the worksheets you use for your planning tables to indicate the Table number and name (i.e. Table 1: Employment Income). You should have one table per subsection (i.e., Employment Income, Business Income, etc., as well as a summary tab).

Give each worksheet in your workbook a header with your name on the left and indicate the purpose of the worksheet.

Feel free to use colors and shading to enhance appearance and readability of your tables.

 

Exhibit 3-1

Tandiwe Okara

2022 Financial Information

1. In 2022, Tandiwe received a salary of $120,000. From her income, Rocky Coast deducted income tax of $33,000 and CPP and EI of $3,754. The company contributed $700 as

Tandiwe’s premium on a supplementary unemployment insurance plan and paid $1,000 to a professional engineering association as an annual membership fee. The company also contributed $5,000 to its registered pension plan on Tandiwe’s behalf, and Tandiwe made a matching contribution of $5,000.

 

2. Tandiwe is provided with an automobile leased by Rocky Coast. During 2022, the company paid total lease costs of $6,000, including $900 for insurance and all applicable taxes. Tandiwe drove her vehicle for a total of 20,000 kilometres, of which 8,000 were employment related.

3. In 2020, Tandiwe was granted an option to buy 100 shares of Rocky Coast at $50 per share when the shares were valued at $55 each. She exercised her option in 2021 and purchased the shares when they were valued at $70 per share. In November 2022, Tandiwe sold these shares for $80 each. Before selling the shares, Tandiwe received a $200 dividend from the company. All the company’s income is eligible for the small business deduction and/or is investment income.

4. Tandiwe sold a bond on February 1, 2022. The selling price of the bond was $20,300, including interest of $300 for the period from November 1, 2020 to January 31, 2022. The bond was purchased on January 1, 2019 for $19,200 ($200 being the interest amount).

 

5. Tandiwe gifted $3,000 to her daughter Jayne (age 16) to buy an investment. Jayne invested her money and earned $400 in interest. In December 2022, Jayne sold her investment for

$4,000.

 

6. In 2022, Tandiwe had the following other receipts and disbursements:

Counselling fee paid by the company for re-employment $ 500 Safety deposit box fee 100

Legal fee to defend last year’s income tax reassessment 1,000

 

7. Tandiwe sold her guitar for $500, which was purchased for $2,000 in 2006. She also sold an antique vase for $2,200, which was purchased for $800 in 2005.

 

8. During the year, Tandiwe paid $500 for the purchase of vitamins and other supplements prescribed by her doctor. He also paid $700 for private dental insurance.

 

9. Tandiwe is divorced and lives with her 15-year-old son and 17 year old daughter. Her son had zero income in 2022 and Tandiwe paid $2,500 for her eligible medical expenses, including

$500 for prescription eyeglasses. In accordance with the legal agreement, she paid an annual support payment of $6,000 to her former spouse and $8,000 as half the private school day student fees for her daughter.

 

10. The company paid Tandiwe an allowance of $5,500 for general employment-related expenses. From this allowance, she used $1,000 to purchase a notebook computer that is primarily used for employment-related work. She spent $500 on a stock trading course.

 

11. Tandiwe owns a condominium in the city that is designated a rental property. She purchased her property in 2005 at a cost of $120,000. The undepreciated capital cost balance of the building was $85,000 on December 31, 2019. In 2022, she received $20,000 as rent and paid the following expenses: interest – $6,000, property tax – $2,000, strata fees - $5,000, and repairs and maintenance - $3,000.

12. Tandiwe is an active member in her community and decided to volunteer as a firefighter during the year. Given the hotter summers and increased forest fires in her area, she feels her environmental engineering background would bring value to her local volunteer fire department.

13. In 2022, Tandiwe had the following other receipts and disbursements: Donation to the David Suzuki Foundation - $ 500 and the BC School District #79 for development of an environmental education program - $1,000; RRSP contribution $ 11,000.

14. Tandiwe received a dividend of $1,000 from the active business income of a CCPC. She also received $1,800 (net of $200 withholding tax) from a U.S. company. She paid $200 to an investment advisor for advice regarding her RRSP investment.

15. Tandiwe began consulting with her condominium Strata to collaborate on ways to reduce waste and upcycle materials from residents. Given her environmental engineering expertise, the strata voted for Tandiwe to provide a report about options available to the residents. Tandiwe did not want payment for doing this but the residents voted to give her three months of strata fees in exchange for her services.

 Exhibit 3-2

2021 Tax Return Details

Listed Personal Property Losses – Carry forward from 2020 $1,000 Registered Retirement Savings Plan:

Deduction limit from previous years’ Notice of (Re) Assessment $10,000 Maximum RRSP Deduction Available $10,000

Net Capital Losses – Carry forward from 2020 $10,000

(5/5)
Attachments:

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