Stuart Planter is a full-time teacher,and he lives in the country with his family.Stuart farms on a part-time basis.Stuart earned $85,000 in 20x6 at his full-time teaching job.During 20x6 he also incurred farm expenses totaling $12,000 and farm revenues totaling $8,000.
Stuart has asked you to help him prepare his 20x6 tax return,and provides you with the following additional information:
• Net capital losses from 20x5 totaled $10,000,and non-capital losses from 20x5 totaled $2,000.
• Stuart had the following amounts deducted from his pay during the year: CPP and EI of $3,452; and income tax of $19,000.
• Stuart contributed $5,000 to his TFSA,and $15,000 to a guaranteed investment certificate (GIC)which pays 4% annual interest.His first interest receipt for the GIC will be on June 30^th of 20x7.
• Stuart received a $1,000 non-eligible dividend in 20x6.
• Stuart's wife works full-time and earns $68,000 a year.
• Stuart had extensive dental work done in 20x6.The total cost was $7,500 and Stuart did not receive any reimbursement for the cost.
Required:
A)Using tax rates and amounts applicable for 2018,calculate the following:
1.Calculate Stuart's net income for tax purposes for 20x6 in accordance with Section 3 of the Income Tax Act.
2.Calculate Stuart's taxable income for 20x6.
3.Calculate Stuart's minimum federal tax liability for 20x6.(Round all numbers to zero decimal places.)
B)Explain why any items have been omitted.

Question

Quizplus · Accepted Answer

The Answer is A)

A) B)Items omitted: Net-capital loss: Stuart did not incur a capital gain during the year,so cannot apply this loss. Property income: The interest on the TFSA is non-taxable,and the interest on the GIC may be reported as property income in 20x7 (the first anniversary of the investment). Income tax deducted from employer: This amount will be entered on Stuart's T1,after NITP,taxable income,and his tax liability.The difference between Stuart's total tax liability (federal and provincial)and the amount deducted by his employer will result in a balance owing or a refund. Stuart's wife's income: His wife will file her own tax return and due to her income level,Stuart cannot claim the spousal non-refundable tax credit.

B)Items omitted:
Net-capital loss: Stuart did not incur a capital gain during the year,so cannot apply this loss.
Property income: The interest on the TFSA is non-taxable,and the interest on the GIC may be reported as property income in 20x7 (the first anniversary of the investment).
Income tax deducted from employer: This amount will be entered on Stuart's T1,after NITP,taxable income,and his tax liability.The difference between Stuart's total tax liability (federal and provincial)and the amount deducted by his employer will result in a balance owing or a refund.
Stuart's wife's income: His wife will file her own tax return and due to her income level,Stuart cannot claim the spousal non-refundable tax credit.

Stuart Planter Is a Full-Time Teacher,and He Lives in the Country