BTAX1 - SUPPLEMENTARY ASSIGNMENT
Problem 1: On July 1, 2018, Molly Malone started her own business on as a self-employed salesperson. (By the way, there are 184 days from July 1 to December 31.) Molly's business is HST registered. The following information relates to her revenue and expenditures from July 1, 2018 to December 31, 2018 and the HST received/paid is not included in these amounts:
(a) Total commissions received in 2018 $ 50,000
(b) Commissions billed, but uncollected as at December 31, 2018 5,000
(c) Of the commissions owing to her as at December 31, 2018, Molly estimated that one account will be uncollectible in the amount of 500
(d) Salary paid to Molly's husband, Frank, for bookkeeping services 45,000 (This amount was based on $40 per hour for 1125 hours of service. The market rate for such services in 2018 was $20 per hour)
(e) On July 1, 2018, Molly purchased a vehicle at a cost of 40,000 This amount includes the HST. Molly has determined that the car is used 80% for business use and expects that this percentage will vary from year to year.
(f) On November 30, 2018, Molly decided to downgrade her automobile and sold the car referred to in part (e) above for proceeds of $20,000. On December 1, 2018 she purchased another vehicle at a cost of $18,000. This amount excludes HST and the business use was 80% and expects that this percentage will vary from year to year.
(g) Auto and travel costs:
Vehicle operating costs $ 1,500 (these are the TOTAL costs incurred from July 1, 2018 to December 31, 2018)
Accommodations 1,000
Meals 800
(h) Interest paid on the loan to purchase the vehicle in item (e) [153 days] $1,600
Molly paid cash for the vehicle referred to in part (f).
(i) Molly attended 3 conventions during the first six months of her business. The costs were as follows:
Convention 1 (includes $140 for meals) $ 600
Convention 2 (no cost allocation available for meals; the convention lasted for 2 days) 400
Convention 3 (includes $50 for meals) 200
(j) Cost of computer purchased in July, 2018 $2,500
Molly has estimated that the computer is used 75% for business use.
(k) Cost of accounting software package, also purchased in July, 2018 (100% business use) $ 800
(l) Cost of office furniture purchased in July, 2018 $ 1,000
(m) Molly conducted the business out of her house. She has set aside office space, which occupies approximately 10% of the total square footage of the house. The total house expenditures for the twelve months of 2018 were as follows:
Mortgage -principal $ 4,400
-interest 8,000
Insurance 495
Repairs and maintenance 600 Municipal taxes 2,100
Utilities 750
Heat and hydro 1,680
(n) Cost of office supplies used 650
(o) Cost of business telephone line 1,600
(p) Tennis club membership dues 950
Required - Using proper income statement format, prepare a Statement of Income from Self-employment and CCA Schedule for the year ended December 31, 2018, to be filed by Molly Malone with her 2018 personal income tax return. (Use the accrual basis to calculate her net income).
Question 2: Mr. Slumlord owns and operates rental properties. The information relating to these properties for the year ended December 31, 2018 is as follows:
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Building A Class 1 - 4%
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Building B Class 3 - 5%
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Building C Class 3 - 5%
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Appliances Class 8-20%
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Capital (Original) Cost
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$140,000
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UCC @ Dec. 31, 2017
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$120,000
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$185,000
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$130,000
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$2,000
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Proceeds of Sale
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N/ A
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* see note
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N/ A
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* see note
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Rent received
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$17,000
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$20,000
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$5,000
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Last month's rent deposits received in 2018, $1,000
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Disbursements:
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Property taxes
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$4,200
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$5,000
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$1,800
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Insurance
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1,000
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2,000
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500
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Repairs
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5,000
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6,000
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1,700
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Mortgage interest
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3,000
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2,500
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-0-
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Mortgage principal
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8,000
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10,000
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-0-
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Superintendent Salaries
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3,800
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4,500
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-0-
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Legal fees paid re: sale of property
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4,000
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Additional information: During 2018, an addition was made to Building C at a cost of $50,000. This addition must be treated as Class 1 (4%) because it was constructed after 1988!
Note: On November 15, 2018, Building B, the land on which it sits and the appliances contained within the building was sold for total proceeds of $500,000. The selling expenses are noted above in the list of disbursements. The proceeds of sale and the related selling expenses were not allocated to Land, Building and Appliances, according to the information provided in the legal sale document. However, a competent appraiser assessed the property and provided the following values:
Land (original cost was $110,000)
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Disbursements:
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Property taxes
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$4,200
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$5,000
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$1,800
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Insurance
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1,000
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2,000
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500
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Repairs
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5,000
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6,000
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1,700
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Mortgage interest
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3,000
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2,500
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-0-
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Mortgage principal
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8,000
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10,000
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-0-
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Superintendent Salaries
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3,800
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4,500
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-0-
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Legal fees paid re: sale of property
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4,000
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The appliances contained in the building were the only assets contained in Class 8 - in other words, there were no Class 8 assets remaining as at December 31, 2018.
Required:
(a) Using proper income statement format, prepare a Statement of Rental Income and CCA Schedule for the year ended December 31, 2018, to be filed by Mr. Slumlord with his 2018 personal income tax return. PROPER FORMAT means that I want to see a proper statement heading and a detailed list of expenses. Provide detail by expense category, not by building.
(b) Calculate any taxable capital gain or allowable capital loss with respect to the sale of the rental property, which Mr. Slumlord will have to report on his 2018 personal income tax return. Remember that a taxable capital gain or allowable capital loss is not considered "Income from Property", so do not include these amounts on the statement of rental income!
Question 3:
Required: Calculate the taxable capital gain or allowable capital loss to be reported in 2018 for each of the following unrelated situations and show your calculations:
(a) On September 15, 2018, Polly Ester sold 200 shares of her holdings in Sears Canada Inc. for $30 per share. (For the ACB of these shares, please round to TWO decimal places!). The shares had been acquired as follows:
February 2, 2017 purchased 200 shares @$18 per share
December 15, 2017 sold 50 shares @$16 per share
January 5, 2018 purchased 150 shares @20 per share
June 30, 2018 purchased 300 shares @ 25 per share
July 2, 2018 purchased 150 shares @ $28 per share
(b) During 2018, Ben Dover sold the following personally owned capital assets:
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Original Cost
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Proceeds of Sale
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Painting
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$3,400
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$900
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Computer
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1,200
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1,500
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Diamond ring
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800
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1,000
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Attachment:- BTAX1 - SUPPLEMENTARY.rar