COMPREHENSIVE TAX RETURN PREPARATION CASE STUDY
As a final case study covering all the rules learned in this course, you are required to prepare comprehensive personal income tax returns using a tax preparation software. The facts you must use for this case study are given below. The completed tax returns must be submitted no later than the week before the end of the course (week 13) - see due date indicated on the Course Schedule/Calendar. I strongly recommend you work on the tax returns throughout the course, as we progress through each module, and not wait until the case study is due. In particular, it may take several days (even over a week in some cases) to obtain permission to download the free tax software that is available with this course (see below) so plan ahead.
The publisher of the textbook for this course has made arrangements with a tax software company called Intuit Canada to have a tax return software called "Profile" made available free of charge to students of this course. The process to download a free student copy of the Profile software requires that you register with Intuit Canada. This process is explained in detail in a separate message I posted in the Comprehensive Tax Return Case Study forum on the Discussion Board. It is also explained on the Student Companion Website under the "Profile Access" tab.
REQUIRED:
Using a tax preparation software - preferably the Profile software that is provided free of charge by Intuit Canada to students of this course - and the facts given below, complete the tax return (T1) for Mr. James Doode and his common-law partner, Susan Bond, for the 2017 taxation year, including all relevant schedules, forms and worksheets, e.g. Form T2125 must be used for the calculation of business income, etc. Ignore any GST or HST aspects. You must submit the completed tax returns for both James and Susan through the Case Study page on the Blackboard portal by attaching the file containing the data for both tax returns if you used the Profile tax software (both files with a .17T extension) - do not attach the program file for the Profile software (file called "profile.exe") as that file does not contain the data for the tax returns you prepared. NOTE: no marks will be given for submitting the Profile program file alone.
You can use another tax preparation software than the Profile software provided with this course. The purpose of this exercise is to work with a tax software - it doesn't matter which one you use. If you do use another software, please note that I will not be able to access the data files created by that software as I only have access to the Profile software. In that case, you will have to submit a pdf copy of the completed tax returns with all relevant schedules, forms and worksheets. If I cannot access the tax returns, I cannot grade them and no marks can be given for your work.
I have posted hints on the forum called "Comprehensive Tax Return Case Study" on the Discussion Board to help you with this assignment.
INFORMATION TO USE FOR THE TAX RETURN CASE STUDY:
James Doode is a die-hard biker who decided to start his own personal business on January 1, 2016 after retiring from the Canadian Armed Forces. Upon retirement in 2015, James elected to receive immediate periodic pension payments from his employer's registered pension plan. James' business consists of a motorcycle shop known as James' Specialty Bike Shop, selling and repairing motorcycles (industry code 441220). James proudly specializes in customizing specialty motorcycles such as exotic choppers to very exclusive clients. All profits from the business are reinvested in the business at this time.
James hired you to help him prepare his personal tax return for the year 2017, as well as for his common-law partner, Susan Bond. James and Susan want to pay the very least tax possible. They will make any election or choice legally available to them to achieve that objective. Below is the information they believe is relevant for the preparation of their tax returns for the current year.
Financial Statements for James' business: Attached is a copy of the internal financial statements for James' business prepared for accounting purposes. The amounts shown have been determined using financial accounting principles only and are not adjusted for tax purposes. James expects you to identify which items need to be adjusted to bring those accounting figures in line with the applicable income tax rules in order to comply with the tax laws in Canada.
Other Information:
James was born on November 1, 1967. He is divorced but currently lives with Susan Bond, his common-law partner, at 123 Main Street, Anytown, Ontario, K0H 1H0. Both have been living together for several years now. James' Social Insurance Number (SIN) is 527-000-145.
Susan's SIN is 130-692-544. She was born on December 2, 1967 and has been blind since birth but still manages to be involved in the business with James by doing the bookkeeping. Susan's only source of income is the salary she earns working as a bookkeeper at James' Specialty Bike Shop (see Note 10 to the financial statements below) and her share of other income with James (see further information below).
During 2017, James received bi-weekly pension payments from his former employer's registered pension plan for a total of $65,000 for the year. Federal income tax of $10,000 was withheld at source on those payments. A T4A slip from the Canadian Armed Forces' pension plan was sent to James confirming the above pension income in box 16 and the above tax withheld in box 22.
James still has spousal support obligations from his previous marriage. He is required to pay $1,000 per month to his former spouse (Mary Doode; SIN: 527-000-129) in accordance with a court order. During the year 2017, James was only able to pay 5 months worth of support. James and Susan have no children but James' older brother Rick lives with them on a permanent basis since 2013 as he cannot live on his own due to a permanent mental disability. Rick was born on June 10, 1963 and has $9,000 of social assistance income for 2017 under the Ontario Disability Support Program. His SIN is 527-000-947. Forms T2201 have already been filed with CRA in previous years for both Susan and Rick and their condition has not changed since.
During 2017, James received $15,000 of eligible dividends on shares of the Great Bank of Canada he owns. A T5 slip from the bank confirming the dividend received (box 24) for 2017 was sent to James. No income tax was withheld on that dividend. James and Susan also earned interest income for a total of $8,000 during 2017 from a joint investment account (each being allocated 50% of the total interest). A T5 slip was sent by the bank indicating the total interest income in box 13 and both names as joint owners. No income tax was withheld on that income either. During the year 2017, James and Susan met with a financial planner to obtain investment advice on how to maximize their investment income. Fees of $3,500 were paid by James in 2017 to the financial planner. Following the advice obtained, James decided to sell half the shares he held in the Great Bank of Canada. James owned 3,000 common shares of the Great Bank he had acquired over the last 10 years with an average cost of $30.00 per share. Half of those shares, i.e. 1,500 shares, were sold on June 1, 2017 at a price of $63.00 per share, on which a 1% commission was paid.
Attachment:- Assignment File.rar