Required: Use the above information to determine Mr. Brown’s - Clawback amount for the social benefit repayment - Net income for tax purposes - Federal tax payable before tax credit (Gross tax) - Tax credits available - Federal tax payable for 2020.
Module 5 - Practice Question
Mr. Jay Brown is 66 years of age and his 2020 income is made up of employment
income of $75,800, contributed $6,500 to his RRSP. He also earned interest
income from Guaranteed Investment Certificate (GIC) of $3,700 during 2020 and
received Old Age Security benefits of $7,400 (because of large business losses
during the previous two years, no amount was withheld from the OAS payments).
Mr. Brown and his family live in Toronto, Ontario. For 2020, Mr. Brown’s
employer withheld maximum CPP ($2,898) and EI ($856) contributions. Other
information pertaining to 2020 is as follows:
1. Mr. Brown’s spouse is 59 years old and qualifies for the disability tax credit.
Her income for the year totaled $4,500.
2. Mr. and Mrs. Brown have two daughters, Keith, aged 15 and Laura, aged
17. Keith had income of $2,700 for the year while Laura had net income of
$3,000. In September 2020, Laura began full time attendance at a Canadian
university. Mr. Brown paid her tuition fees of $6,000, of which $3,500 was
for the fall 2020 semester. Laura is willing to transfer her tuition credit to
her father.
3. The family medical expenses for the year, all of which were paid by Mr.
Brown, totaled $3,845. Of this amount, $300 was paid for Keith and $900
for Laura.
4. During the year, Mr. Brown made cash donations to registered Canadian
charities in the amount of $2,000.
5. During the year, Mr. Brown made contributions to federal political parties
totaling $1,800.
Required: Use the above information to determine Mr. Brown’s
- Clawback amount for the social benefit repayment
- Net income for tax purposes
- Federal tax payable before tax credit (Gross tax)
- Tax credits available
- Federal tax payable for 2020.
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