Mr. Daniel Dean is employed as a project manager for Porter Ltd., a Canadian public corporation. He is married and has two children. The younger child is 16 and the older child is 19. Mr. Dean has requested that you assist him in the preparation of his 2015 income tax return. Relevant financial information for 2015 is provided as follows:
1. Mr. Dean received a gross salary of $78,000 for the year. From this amount, Porter Ltd. deducted CPP contributions of $2,480, EI premiums of $931, and company pension contributions of $3,900. In addition, in February, 2015, Portus Ltd. paid Mr. Dean a $6,000 bonus based on his 2014 work performance. A 2015 bonus of $9,500 was paid to him on March 1, 2016.
2. In addition to his salary, Porter Ltd. paid the following employee benefits on Mr. Dean’s behalf:
Company Pension Contributions $2,300
Group Term Life Insurance Premium ($90,000 coverage) 650
Dental Insurance Premium 625
3. Mr. Dean has the full use of a company automobile that Porter Ltd. leases for an annual payment of $5,200. Porter Ltd. paid all of the $4,300 in operating costs. During the year, Mr. Dean drove the car 21,000 kilometers, of which 7,000 kilometers were for employment purposes.
4. Mr. Dean’s employment contract requires that he work on a full time basis from an office in his home. Porter Ltd. pays Mr. Dean an annual allowance of $2,400 to cover his expenses for the office and equipment. The home office occupies 30 square meters of his 300 square metres home. During the year, he incurred the following expenses:
Home Expenses (100 Percent):
Property Tax 2,500
Office Supplies 230
Computer and Fax Machine Purchase 2,700
Total Expenditures $16,930
5. During the year, Mr. Dean took his children to visit their grandparents using airline tickets acquired through frequent flyer points accumulated while he travelled on company business. The tickets were valued at $1,300.
6. On December 25, 2015, Mr. Dean sold all of his 800 shares of Hair Global Inc., a public corporation, for proceeds of $8,600. The shares were acquired for $11,000. On January 10, 2012, on the advice of his broker, he acquired 800 shares of Hair Global Inc. for $5,800.
7. Mr. Dean participates in Porter Ltd.’s stock option plan. In January, 2015, he received options to purchase 2,500 shares at $12 per share. At this time, the shares were trading for $12 per share. He exercises the options in May, 2015, when the shares are trading for $15 per share using funding from a bank loan to pay the option price. During 2015, he paid $1,200 interest on the bank loan.
8. In September, 2015, Mr. Dean receives an eligible dividend on his Porter shares of $4,500. He uses the funds to purchase 250 more Portus shares at $18 per share. In November, 2011, Mr. Dean sold 1,250 shares of Porter Ltd. at $21 per share.
9. In 2014, Mr. Dean contributed $4,300 to a spousal RRSP. His wife had not previously contributed to an RRSP. In August, 2015, Mr. Dean’s wife withdrew $1,000 from the RRSP to fund a jewellery purchase. Mrs. Dean had no other income in 2015. On February 10, 2016, Mr. Dean contributes $8,000 to a spousal RRSP.
10. At the beginning of 2015, Mr. Dean had undeducted RRSP contributions carried forward from 2014 of $2,200. Mr. Dean’s 2014 Earned Income was $61,500. Because he was only admitted to his employer’s pension plan at the beginning of 2015, he has no 2010 PA.
11. Mr. Dean’s oldest child, Marianne, is 19 years of age. During the year, she attended university on a full time basis for eight months, had interest income of $3,000 and earned a scholarship of $10,000. Mr. Dean paid her paid tuition fees of $7,150. Any unused credits are available to be transferred to her father.
12. Mr. Dean purchased a sports car for $2,500 on February 20, 2011, with the intent of restoring it for resale. He rebuilt the car and sold it to a collector for $14,500 on April 10, 2015. He incurred costs of $8,100 for new parts and supplies.
13. Mr. Dean incurred net capital losses of $2,500 in 2005 [(1/2)($5,000)], $6,000 in 2006 [(1/2)($12,000)], and $3,000 in 2008 [(1/2)($6,000)]. He has not been able to deduct any of these amounts in previous years.
A. Determine Mr. Dean’s minimum Net Income for Tax Purposes and his minimum Taxable Income for the 2015 taxation year. Ignore any GST or PST considerations.
B. RRSP limit for 2014
C. Based on your answer to Part A, calculate Mr. Dean’s minimum federal Tax Payable for the 2015 taxation year before consideration of any income tax withheld by his employer. Include in your solution any amounts available for carry forward by Mr. Dean or his family at the end of 2015.