Accounting Emily and John formed a tax consulting partnership on February 1, 2016. Each partner contributed $50,000 in return for an equal share of the profits from the partnership. On January 1, 2020, John sold his interest to Julie for $150,000. The following is the income statement of the partnership: Income Statement For the year ended December 31, 2019 Gross revenue $526,000 Expenses: Office expenses $89,000 Rent 63,400 Office salaries 84,650 Charitable donations 17,600 Amortization (Note 1) 24,600 Meals and entertainment 25,000 304,250 221,750 Other income: Gain on sale of shares (Note 2) $92,400 Dividends from Canadian-resident public corporations 48,000 Capital dividends 24,000 164,400 Net income $386,150 Notes: CCA for 2019 was $57,000. The capital gain for tax purposes is the same as the financial accounting gain. In 2019, each partner drew $140,000. Prior year financial statements of the partnership provided the following information for the following years ended December 31: 2016 2017 2018 Business income (loss) $(70,000) $127,300 $159,100 Taxable capital gains Nil 12,800 Nil Charitable donations Nil 4,200 8,400 Drawings — Emily 24,000 48,000 60,000 Drawings — John 24,000 48,000 72,000 The following applies to John in 2019: he personally received cash dividends (eligible) from Canadian-resident public corporations in the amount of $12,600; he is devoiced and lives with two dependents, 2 and 13 years old; and he has a net capital loss of $80,000 carried forward from 2014; Required: Compute John’s basic federal tax payable for 2019, showing all calculations, including partnership income for the year (22%). 2. Compute the ACB of John’s partnership interest immediately before the sale and his taxable capital gain related to the disposition of the partnership interest
Accounting
Emily and John formed a tax consulting
The following is the income statement of the partnership:
Income Statement
For the year ended December 31, 2019
Gross revenue $526,000
Expenses:
Office expenses $89,000
Rent 63,400
Office salaries 84,650
Charitable donations 17,600
Amortization (Note 1) 24,600
Meals and entertainment 25,000 304,250
221,750
Other income:
Gain on sale of shares (Note 2) $92,400
Dividends from Canadian-resident public corporations 48,000
Capital dividends 24,000 164,400
Net income $386,150
Notes:
- CCA for 2019 was $57,000.
- The
capital gain for tax purposes is the same as the financial accounting gain.
In 2019, each partner drew $140,000.
Prior year financial statements of the partnership provided the following information for the following years ended December 31:
2016 2017 2018
Business income (loss) $(70,000) $127,300 $159,100
Taxable
Charitable donations Nil 4,200 8,400
Drawings — Emily 24,000 48,000 60,000
Drawings — John 24,000 48,000 72,000
The following applies to John in 2019:
- he personally received cash dividends (eligible) from Canadian-resident public corporations in the amount of $12,600;
- he is devoiced and lives with two dependents, 2 and 13 years old; and
- he has a net capital loss of $80,000 carried forward from 2014;
Required:
- Compute John’s basic federal tax payable for 2019, showing all calculations, including partnership income for the year (22%).
2. Compute the ACB of John’s partnership interest immediately before the sale and his taxable capital gain related to the disposition of the partnership interest
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