Carl Kay is the vice-president of KM Ltd., a Canadian-controlled private corporation located in Halifax, Nova Scotia. KM operates a real estate development business constructing and selling commercial buildings and residential apartments. Carl's 2023 financial transactions include the following. Carl receives a salary of $100,000 from KM. From this amount, KM deducted El and CPP of $4,756 (includes CPP enhanced contributions of $631) and income tax of $21,000. The company provides him with a car that cost $50,000 and that has an undepreciated capital cost of $18,000. The operating costs of $3,000 were paid by KM. In 2023, Carl drove the car 20,000 km, of which 6,000 km were for employment purposes. KM contributed $4,000 on Carl's behalf to a deferred profit-sharing plan. Although KM does not have a group life insurance plan, it pays Carl's personal life insurance premium of $1,300 (coverage - $75,000). During the year, Carl sold 1,300 shares of KM Ltd. for $14 per share. He acquired the shares three years earlier for $6 per share as part of a company stock-option plan. At the time of purchase, the shares were valued at $10 per share. • In 2022, Carl constructed a 10-suite apartment block. He sold the property in 2023 for $800,000, which was $300,000 more than the original land and building cost. He received $80,000 of the proceeds in cash, with the balance due in five annual instalments beginning in 2024. The property incurred a net rental loss of $9,400 (before amortization). • Carl sold his summer cottage for $119,800 after it was announced that a waste disposal site would be developed in the area. He purchased the cottage six years earlier for $159,700. • In 2020, Carl loaned $22,000 to Alloy Ltd., a Canadian-controlled private corporation. All of the company's assets are used in an active business. The 2022 interest of $1,900, which Carl included in income, has not been received. The company is in severe financial difficulty and may not survive beyond next year. ⚫ Carl sold shares of a public corporation, purchased in 2021 for $16,000, for $26,600. ⚫ In November, Carl received a legal bill for $2,600 relating to a dispute over a tax reassessment. Carl paid $1,500 in December 2023 and the balance in January 2024. . • Carl received eligible dividends of $2,600 and non-eligible dividends of $1,300 from Canadian corporations and $1,800 from a foreign corporation. The foreign corporation remitted a 10% withholding tax to its government. Carl celebrated his 65th birthday in December 2023. He supports his spouse, who is retired. His spouse has interest income of $3,500 in 2023. During the year, Carl made gifts of $6,000 to a local charity. He paid tuition fees of $600 to attend a three- month evening course at a university. ⚫ Carl has used his entire capital gains deduction. At the end of 2022, he has unused net capital losses of $12,000 and non-capital losses of $7,000. Required: Calculate Carl's 2023 net income for tax purposes, taxable income, and federal income tax.

Carl Kay is the vice-president of KM Ltd., a Canadian-controlled private corporation located in Halifax, Nova Scotia. KM operates a real estate development business constructing and selling commercial buildings and residential apartments. Carl's 2023 financial transactions include the following. Carl receives a salary of $100,000 from KM. From this amount, KM deducted El and CPP of $4,756 (includes CPP enhanced contributions of $631) and income tax of $21,000. The company provides him with a car that cost $50,000 and that has an undepreciated capital cost of $18,000. The operating costs of $3,000 were paid by KM. In 2023, Carl drove the car 20,000 km, of which 6,000 km were for employment purposes. KM contributed $4,000 on Carl's behalf to a deferred profit-sharing plan. Although KM does not have a group life insurance plan, it pays Carl's personal life insurance premium of $1,300 (coverage - $75,000). During the year, Carl sold 1,300 shares of KM Ltd. for $14 per share. He acquired the shares three years earlier for $6 per share as part of a company stock-option plan. At the time of purchase, the shares were valued at $10 per share. • In 2022, Carl constructed a 10-suite apartment block. He sold the property in 2023 for $800,000, which was $300,000 more than the original land and building cost. He received $80,000 of the proceeds in cash, with the balance due in five annual instalments beginning in 2024. The property incurred a net rental loss of $9,400 (before amortization). • Carl sold his summer cottage for $119,800 after it was announced that a waste disposal site would be developed in the area. He purchased the cottage six years earlier for $159,700. • In 2020, Carl loaned $22,000 to Alloy Ltd., a Canadian-controlled private corporation. All of the company's assets are used in an active business. The 2022 interest of $1,900, which Carl included in income, has not been received. The company is in severe financial difficulty and may not survive beyond next year. ⚫ Carl sold shares of a public corporation, purchased in 2021 for $16,000, for $26,600. ⚫ In November, Carl received a legal bill for $2,600 relating to a dispute over a tax reassessment. Carl paid $1,500 in December 2023 and the balance in January 2024. . • Carl received eligible dividends of $2,600 and non-eligible dividends of $1,300 from Canadian corporations and $1,800 from a foreign corporation. The foreign corporation remitted a 10% withholding tax to its government. Carl celebrated his 65th birthday in December 2023. He supports his spouse, who is retired. His spouse has interest income of $3,500 in 2023. During the year, Carl made gifts of $6,000 to a local charity. He paid tuition fees of $600 to attend a three- month evening course at a university. ⚫ Carl has used his entire capital gains deduction. At the end of 2022, he has unused net capital losses of $12,000 and non-capital losses of $7,000. Required: Calculate Carl's 2023 net income for tax purposes, taxable income, and federal income tax.

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter5: Gross Income: Exclusions

Section: Chapter Questions

Problem 30P

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