The case:
Omar Sharif (527-000-145) is married, semi-retired air force pilot living in Banff, Alberta. His wife, Amina, (SIN 130-692-544) was blinded three years ago when she fell while rock climbing.
They have been your clients for many years. Omar was born on February 24, 1964 and Amina was born on April 10, 1968. They are both Canadian citizens.
After some discussion with Omar and Amina, you confirm they have never owned any foreign property. As he has for many years, Omar authorizes CRA to provide information to Elections Canada and he authorizes you to e-file his return. They are currently living at 69 Beaver Street in Banff, Alberta T0L 0C0. Their home phone number is (111)111-1111.
Omar and Amina have three children:
1) Bryan (SIN 527-000-947) was born on March 12, 2008 and had no income during the year.
2) Janice (SIN 527-000-269) was born on June 6, 2002 and is in high school. She had income from babysitting totaling $400 during 2015.
3) Willa (SIN 527-000-228) was born on January 22, 1996 and is attending university in Edmonton. Willa had Net Income of $3,300 during 2015.
Omar loves flying and was hired in February to fly fire bombers June 1 to September 30 for the provincial forest service fire control squad located in Banff. Omar informs you that on February 12, 2015, he received $2 million from his mother's estate. Using some of these funds, Omar bought a house in Banff. The remainder of the funds were invested with his stock broker, Bull & Bear Inc.
Amina, a voice teacher, adapted to her blindness quickly and required no outside help to take care of the family last year or for the first eight months of the 2015. She decided to move temporarily to Edmonton with Willa to attend the music program at the University of Alberta.
During 2015, Amina made a $50,000 loan to her brother, Andrew, who used the funds to expand his business. On December 15, 2015, Andrew paid her interest of $1,500 and prin¬cipal of $5,000. Also during 2015, Amina gave private voice lessons and earned a total of $3,200 in teaching fees. Amina had no other income during the year.
Omar brings you the following receipts and documents:
1. A T4, T4A and a T5
2. A T2202A "Tuition And Education Amounts Certificate" for himself from Athabasca University. It showed he was a part time student for 6 months and paid $591 in tuition for 2015. [T2202]
3. A receipt for $1,000 from the Canadian Wildlife Federation dated December 3, 2015.
4. A statement from the Banff Dental Clinic that he paid a total of $1,650 during 2015. This consisted of $850 for himself on November 24, and $200 each for Amina, Bryan, Willa and Janice on December 15.
5. Twelve monthly bus passes that were purchased during 2015 by Janice for $30 per month.
6. One receipt for Bryan for a one week hockey camp in Edmonton. The registration fee of $650 includes $182 for accommodation and $193 for meals. A second receipt for Bryan of $200 for membership in the co-ed soccer club. This enabled Bryan to participate in the club's weekly games for four months of the year.
7. An agreement of purchase and sale for a house at 69 Beaver St. in Banff. The purchase price was $800,000 and the invoice for legal fees totalled $1,200. The deal closed March 31, 2015. Omar and his family had been living in a rented townhouse for the last 5 years. Prior to that Omar had owned a house, but it went to his ex-wife in the divorce settle¬ment. Amina has never owned a principal residence.
8. A T2202A "Tuition And Education Amounts Certificate" for Amina from the University of Alberta. It showed she was a full time student for 4 months and paid $2,600 in tuition for 2015.
9. A T2202A "Tuition And Education Amounts Certificate" for Willa from the University of Alberta. It showed she was a full time student for 8 months and paid $5,200 in tuition for 2015. She had signed the certificate authorizing the transfer of all education related amounts to her father.
10. An instalment statement for 2015 that showed that Omar had paid the CRA instalments of $1,500 on September 15 and December 15 ($3,000 in total). These were the instal¬ments requested by the CRA for the year due to his self-employed income in the previous year.
11. His 2014 Notice of Assessment that shows that his 2015 RRSP Deduction Limit is $13,979. He has no undeducted RRSP contributions from previous years.
12. A contribution receipt to a spousal RRSP (Omar contributed to Amina's RRSP) for $2,000 from Bull & Bear Inc. dated February 20, 2016.
13. A receipt for $2,000 from Omar's 40 year old sister, Shirley Burns (SIN 527-000-582) for child care. She took care of Bryan after school during 2015 while Amina was in Edmonton.
14. A receipt for Janice, an accomplished trombone player, from the Peak Music Camp in Whistler, B.C. The receipt for $1,600 was for two weeks of intensive music instruction at the camp. This fee also included $400 in accommodations and $325 for meals.
15. A receipt for $2,148 from the Mountain Moving Company dated April 1, 2015. The invoice showed that the fee was charged to pack and move Omar's household effects from 220 - 4th Avenue South East, Calgary T2G OL1, to his new house in Banff, a total of 125 kilometers. Omar's new home is 5 kilometers from the Alberta Fire Control offices. Omar and his family made the move in his truck. Since Omar has no travel receipts, he agrees that you should use the simplified method to calculate his moving costs.
Other Information
During your discussion with Omar, you note the following information:
1. On January 8, 2015, Omar sold his 1977 Ford Mustang for $50,000. The car was driven only on sunny Sunday afternoons. Its original price in 2000 was $6,000, and Omar reconditioned it over the years at a cost of $12,000.
2. At the beginning of 2015, Omar has a net capital loss carry forward of $2,580 [(1/2)($5,160)] from 2013.
3. During 2015, he paid $6,000 in spousal support to his ex-wife, Marilyn (SIN 527-000-103), pursuant to a written agreement.
4. For the last two years, in the winter months, Omar gives private flying lessons. His state¬ment of income of this unincorporated business, Sharif's Flying School, for the fiscal year ended December 31, 2015 is as follows:
Sharif's Flying School
|
Lesson fees
|
$40,200 |
|
Plane rentals
|
$ 9,600 |
|
Business meals and entertainment
|
3,250 |
|
Licenses and fees
|
1,650 |
|
Office expenses
|
550 |
|
Accounting fees
|
300 |
|
Amortization of laptop computer and software
|
900 |
|
Total expenses
|
$ 16,250 |
|
Net Income
|
$ 23,950 |
On April 15, 2015, Omar purchased a laptop computer and various software that will be used solely for his Flying School. The laptop cost $1,900 and the software costs totalled $800. Prior to this, Omar had not been using a computer for business purposes.
5. Omar owns a commercial property at 9700 Jasper Avenue, Edmonton, Alberta T5J 4C8. The property had been purchased on February 15, 2013 for $600,000 of which $160,000 was allocated to the land. Shortly after Omar purchased the building, the major tenant went bankrupt and he had rental losses for 2013 and 2014. No capital additions were made since the building's acquisition. The financial information for the property, for the year ended December 31, 2015, is as follows:
|
Rental income
|
$46,700 |
|
Mortgage interest
|
$19,500 |
|
Maintenance and repairs
|
5,100 |
|
Management and administration fees
|
8,200 |
|
Legal fees
|
1,000 |
|
Property taxes
|
11,750 |
|
Total expenses
|
$45,550 |
|
Net Income before amortization
|
$1,150 |
Required:
A. Complete Omar's 2015 tax return, assuming he does not elect to pension income split and Amina does not file a tax return. Include in your notes in his file any tax planning points you should discuss with him. Ignore any GST implications.
B. Calculate the maximum tax savings that are available if Omar elects to split his pension income with Amina.