90.2K

Verified Solution

Link Copied!

Mr. Donald lives in Burlington, Ontario. He is 52 years old. His spouse Melanie is 35 years old and has 2021 net income of $18,500. They have two children both of whom are in perfect health. Their daughter Ivey is 12 and has net income from part time jobs of $300. Their son Hugh is 10 and has no income of his own.

Mr. Donald works for a large public company and, in 2021, his basic salary is $103,000 and he earns commission income of $26,140. In 2021, his employer makes the following payroll withholdings:

Premiums to company's disability insurance plan	$1,200
Union Dues	260
CPP Contributions	3,166
Payments for personal use of company car	600
Donations to Registered Charities	1,200
EI Premiums	890
RPP Contributions	4,200

Other Information:

• Mr. Donald's employer provides him with an automobile that was purchased in 2018 for $38,000. His employer pays all of the operating expenses which, in 2021 totalled $9,800. During the year, Mr. Donald drove the car a total of 48,000 kilometers, 42,000 of which were for employment use with 6,000 for personal use. he automobile was only available to Mr. Donald's for 10 months of the year
• Medical Expenses for the family were

Melanie	$2,600
Ivey	1,300
Hugh	6,200

• Mr. Donald is required to maintain an office in his home without reimbursement from his employer. His employer provides the required T2200 form. He uses 20% of the home's usable floor space for his office. The home office expenses are:

Mortgage Interest	$9,600
Property Taxes	7,600
Insurance	4,500
Utilities and Maintenance	5,000

• In addition to his employment income, Mr. Donald has taxable capital gains from stock market trading of $4,500, a rental loss of $6,000 from a residential rental property, and $8,600 of profits from a business he carries on as a sole proprietor
• Mr. Donald's employer makes a matching $4,200 contribution to the company's RPP on behalf of Mr. Donald. The employer also makes a matching $1,200 contribution to the company's disability insurance plan on behalf of Mr. Donald
• Due to a two month sick leave, Mr. Donald receives disability insurance benefits of $10,950. Mr. Donald has been making a $1,200 contribution each year since 2018. He has had no disability insurance claims in any of the years 2018 to 2020.
• As with all of the other employees, Mr. Donald received a $450 gift certificate for use at a local department store. He also received a $300 cash reward for sales performance in 2021.
• Mr. Donald receives an annual travel allowance of $4,800 to cover hotel costs while travelling for employment purposes. His actual hotel costs for 2021 were $5,100. In addition, he spent $6,300 on client meals and entertainment. His employer does not reimburse any of these expenses

Other Relevant RRSP Information:

• Mr. Donald's 2020 net income was $98,000. This was composed of employment income of $93,000 (after the deduction of $4,000 for RPP contributions), interest income of $3,000, a rental loss of $7,000, and business income of $9,000.
• At the end of 2020, Mr. Donald's unused RRSP deduction room was $6,200 and he had no undeducted contributions. His employer reported a 2020 PA of $8,000.

Required: ( Show all your calculations and explanations, amd follow the proper Tax Return flow) - Ignore GST/HST & PST considerations.

Part A.

Calculate Mr. Donald's maximum deductible RRSP contribution for 2021.

Part B.

Assume that Mr. Donald contributes the amount calculated in Part A to his RRSP. Calculate Mr. Donald's minimum 2021:

• Net Income
• Taxable Income
• Federal Income Tax Payable ignoring any income tax that may have been withheld by the employer or paid by instalments

Answer & Explanation Solved by verified expert

See Answer