Meixiang Ward is an employee of a Canadian controlled private corporation (CCPC). She is single and has two children aged 19 and 5.
Required:
For the 2013 taxation year, calculate the following for Meixiang:
(a) Net income for tax purposes and taxable income (30 marks)
(b) Federal income tax. Ignore any adjustments to CPP or EI. (20 marks)
Notes:
1. Meixiang received gross salary of $85,000. From this amount, CCPC deducted income taxes of $17,000, CPP contributions of $2,356, EI premiums of $891, registered pension plan contributions of $6,000, union dues of $550 and employee's share of group disability insurance premium $300.
2. In addition to her salary, CCPC paid the following on Meixiang's behalf:
Registered pension plan
$6,500
Group private medical and dental insurance
625
Group disability insurance premium
300
3. Meixiang had the use of a car which CCPC purchased for $35,000 and a net book value of $21,090. She drove a total of 25,000 km, of which 15,000 were for employment purposes. The company paid all of the operating expenses of $4,500. Meixiang reimbursed CCPC $500 for operating expenses on February 14, 2014.
4. CCPC gave her a $100,000 loan with a stated rate of 0.50%. The loan has been outstanding all of 2013. Meixiang paid the interest owing for 2013 on February 14, 2014.
5. Meixiang was hospitalized and off work from July 1 to August 31. During this time she collected $4,200 from the company's group sickness or accident insurance plan to cover her lost salary. The plan was a benefit which started in 2012 and the premiums were the same last year as in the current year. She returned the car to the company while she was hospitalized.
6. For Christmas, all employees receive a $100 gift card from Best Buy. As well, to celebrate her 10th year with the company, Meixiang received a jade bracelet valued at $400.
7. Meixiang participates in CCPC's stock option plan. In May of 2001, she received options to purchase up to 2,500 shares at $10 per share. CCPC's shares were valued at $12.00 at this date. She exercised the options on June 17, 2008. At this time, the shares were valued at $15 per share. On May 10, 2013 Meixiang received non-eligible dividends of $2,500 on these shares. On September 27th she sold 1,000 of these shares for $20 per share and paid brokers fees of $500.
8. In 1999, Meixiang paid $8,100 for shares of ABC Ltd. The shares were sold in 2013 for proceeds of $4,000.
9. The older child is 19 years of age. During the year, she attended university full-time for eight months. She had income of $5,200 from her summer job. Her tuition fees were $6,350. She also paid $185 for a U-Pass (public transit pass for the school year). She will transfer any unused credits to Meixiang.
10. Meixiang's mother (aged 75) lives with her as she needs care due to a physical infirmity. Her mother's net income in 2013 was $16,000.
11. On September 30, 2013, 500 shares of XYZ Inc., a Canadian public corporation, were sold for $25,000. The shares were purchased as follows: 1,500 shares for $10 per share in 2001, 300 shares for $8 per share in 2002, and 800 shares for $25 per share in 2006. A stock dividend of 10% of shares held was received in 2007 which increased the corporation's paid up capital by $5 per share. Brokerage fees were paid on the current year sale in the amount of $500.
12. Other receipts and (disbursements) during the year:
Eligible dividends from XYZ Inc. (actual amount received)
$3,000
Paid dental fees for 5 year old daughter
(4,100)
Paid for laser eye surgery for 19 year old daughter
(1,500)
Sale of ring (cost $800)
1,300
Daycare fees for the 5 year old
(8,000)
Donation to registered charity - this is the first time Meixiang ever made a donation to any organization
(4,000)
13. A review of Meixiang's 2012 T1 revealed the following information:
Net-capital losses carry forward from 1999 of $27,096