Reference no: EM132271920
Taxation Assignment - Using ProFile
Tax Software Assignment Problem - This problem is an expansion of the Chapter 4 problem from your course text: Byrd & Chen Volume II.
Mr. Buddy Musician (SIN 527-000-061) was born in Vancouver on August 28, 1950. He has spent most of his working life as a pianist and song writer. He and his family live at 111 WWW Street, Vancouver, B.C. V4H 3W4, phone (604) 111-1111.
Mr. Musician's wife, Natasha (SIN 527-000-129), was born on June 6, 1992. She and Mr. Musician have four children. Each child was born on April 1 of the following years, Linda; 2012, Larry; 2013, Donna; 2014, and Donald; 2015. Natasha's only income during 2017 is $3,000 from singing engagements.
Buddy and Natasha Musician have two adopted children. Richard (SIN 527-000-285) was born on March 15, 2000 and has income of $2,800 for the year. Due to his accelerated schooling, he started fu 11 ti me attendance at university in September of 201 7 at the age of 1 7. His first semester tuition fee is $3,000 and he requires books with a total cost of $375. These amounts are paid by Mr. Musician.
The other adopted child, Sarah, was born on September 2, 1997, and is in full time attendance at university for all of 2017 (including a four month summer session). Her tuition is $9,600 and she requires textbooks which cost $750. These amounts are also paid by Mr. Musician. Sarah has no income during the year.
Neither Richard nor Sarah will have any income in the next three years. They both have agreed that the maximum tuition amount should be transferred to their father. Mr. Musician's mother, Eunice, was born on April 10, 1930 and his father, Earl, was born on November 16, 1928. They both live with Mr. Musician and his wife. While his father has some mobility issues, he is not infirm. His mother is legally blind. Eunice Musician had income of $9,500 for the year, while Earl Musician had income of $7,500.
Other information concerning Mr. Musician and his family for 2017 is as follows:
1. Mr. Musician earned $16,500 for work as the house pianist at the Loose Moose Pub. His T 4 showed that his employer withheld $500 for income taxes and $268. 95 for El. No CPP was withheld as he has previously filed an election to stop contributing to the CPP.
2. During the year, Mr. Musician made his annual $3,000 donation to Planned Parenthood Of Canada, a registered Canadian charity.
3. Mr. Musician has been married before to Lori Musician (SIN 527-000-319). Lori is 52 years old and lives in Fort Erie, Ontario.
4. Mr. Musician has two additional children who live with their mother, Ms. Dolly Nurse (SIN 527-000-582), in Burnaby, British Columbia. The children are Megan Nurse, aged 12 and Andrew Nurse, aged 14. Neither chi Id has any income during 2017. While Ms. Nurse and Mr. Musician were never married, Mr. Musician acknowledges that he is the father of both children. Although Buddy has provided limited financial aid by paying their dental and medical expenses, the children are not dependent on Buddy for support.
5. Mr. Musician wishes to claim all his medical expenses on a calendar year basis. On December 2, 2017, Mr. Musician paid dental expenses to Canada Wide Dental Clinics for the following individuals:
|
Himself
|
$1,200
|
|
Natasha (wife)
|
700
|
|
Richard (adopted son)
|
800
|
|
Sarah (adopted daughter)
|
300
|
|
Linda (daughter)
|
100
|
|
Earl (father)
|
1,050
|
|
Lori (ex-wife)
|
300
|
|
Dolly Nurse (mother of two of his children)
|
675
|
|
Megan Nurse (daughter of Dolly Nurse)
|
550
|
|
Total
|
$5,675
|
6. Mr. Musician signed a contract with Fred Nesbitt on January 13, 2017 to do permanent modifications to his house. The contract was for the installation of ramps with sturdy hand railings outside his front and back doors to give his parents easier access to the house and modifications to their bathroom so they wou Id be less Ii kely to fall when using the shower. The contract price was $5,800. As neither of his parents has a severe and prolonged mobility impairment, these expenditures are not eligible medical expenses.
7. Mr. Musician paid four quarterly instalments of $1,000 each (total of $4,000) for 2017, as requested on his Instalment Reminders from the CRA. He paid each instalment on the due date.
8. Mr. Musician receives $6,978.87 in Old Age Security payments and $5,500 in Canada Pension Plan "retirement benefit" payments over 12 months. There was no tax shown as withheld on his T4A(OAS) or his T4A(P).
9. Mr. Musician builds a state-of-the-art home theatre in a new extension of his home. In order to finance it, he sells stock in his RRSP and withdraws the funds from his RRSP. His T4RSP showed $52,000 in withdrawals from the House of Rock Bank (Box 22) and total tax of $15,600 deducted from these payments.
10. Several of Mr. Musician's songs, including his outstanding hit, "Drop Kick Me Jesus Through The Goal Posts Of Life", have provided him with substantial royalty payments over the years. In 2017, the Never Say Die Record Company paid him $78,000 in royalty payments. No TS was issued by the Company.
11. In order to ensure the financial security of his family, Mr. Musician decided to return to songwriting in earnest. On November 1, 2017, he rented a small, quiet studio for $700 a month and purchased a Roland electric piano for $7,750 that was delivered there. He does not plan to use the space or piano for personal enjoyment, only for composing.
12. The previous year, on January 2, 2016, Mr. Musician elected not to make any further CPP contributions on his self-employed income.
13. Mr. Musician is required by a court order to pay spousal support of $400 per month to his former spouse, Lori Musician. Mr. Musician made spousal support payments of $4,800 during 2017.
14. Mr. Musician is required by a court order to make child support payments of $350 per month for his two children, Megan and Andrew Nurse. A total of $4,200 was paid during the year.
15. Mr. Musician made contributions to the Federal Liberal Party in the amount of $610 during the year.
16. Mr. Musician made a $5,000 contribution to his TFSA during the year. Thanks to the excellent investing advice of his gardener, the balance in his TFSA account has grown to more than $150,000 by the end of the year.
Required: With the objective of minimizing Mr. Musician's Tax Payable, prepare Mr. Musician's 2017 income tax return using the ProFile tax software program assuming Natasha does not file a tax return. List any assumptions you have made, and any notes and tax planning issues you feel should be placed in the file.
Attachment:- Assignment File.rar