Tax Planning for Alec Trevelyan

Summary of Alec Trevelyan's Financial Information

Mr. Alec Trevelyan lives in Kamloops, British Columbia. He is 42 years old. His wife Naomi is 40 years old and, for 20XX, she has Net Income for Tax Purposes of $6,000. They have two children. Their daughter Rhoda is 16 and has income from part time jobs of $1,200. Their son Mitchell is 12 and has no income of his own. Mr. Trevelyan works for a large public company and, during 20XX, his basic salary is $105,000. In addition, he has commission income of $24,520. During 20XX, his employer withholds the following amounts from his earnings: Registered Pension Plan Contributions $4,800 Canada Pension Plan Contributions 2,564 Employment Insurance Premiums 836 Donations to United Way 1,200 Union Dues 815 Contributions to Company’s Disability Plan 1,200 Other Information Last year, Mr. Trevelyan’s Net Income for Tax Purposes was $98,000. This was made up of net employment income of $93,000 (after the deduction of $4,000 in RPP contributions), interest income of $3,000, a net rental loss of $7,000, and business income of $9,000. At the end of last year, Mr. Trevelyan’s Unused RRSP Deduction Room was $6,200; he had no undeducted contributions, and his employer reported that he had a Pension Adjustment of $8,000. Mr. Trevelyan’s employer makes a matching $4,200 contribution to the company’s RPP on behalf of Mr. Trevelyan. Mr. Trevelyan’s employer makes a matching $1,200 contribution to the company’s disability plan on behalf of Mr. Trevelyan. The comprehensive disability plan provides periodic benefits during any period of disability to compensate for lost employment income. Due to a two month sick leave in 20XX, Mr. Trevelyan receives disability benefits of $10,950. Mr. Trevelyan has been making a $1,200 contribution in each year for the last four years (including the current year) and has had no benefit claims in the previous three years. Mr. Trevelyan was the top salesperson in the office and received an award of an all expense paid trip to Costa Rica in 20XX. The cost of the trip was $3,200 and, in addition, Mr. Trevelyan was provided with $1,000 for incidental expenses on the trip. Mr. Trevelyan is required to maintain an office in his home without reimbursement from his employer. His employer provides the required T2200 form. He uses 15 percent of the home’s floor space for his office. The costs for his home are as follows: Utilities And Maintenance $5,000 Insurance 4,500 Property Taxes 7,600 Mortgage Interest 9,600 Mr. Trevelyan receives a travel allowance of $4,800 per year to cover his hotel costs. His actual hotel costs for 20XX were $5,100 and, in addition, he spent $5,350 on business meals and entertainment. His employer does not reimburse these costs. As with all of the other employees, Mr. Trevelyan received a $500 gift certificate for use at a local department store. Mr. Trevelyan has taxable capital gains from stock market trading of $13,000. His gains included $10,000 from the sale of Microsoft shares, $8,000 from the sale of Apple shares, and $9,000 from the sale of Red Hat shares. He regretted his sale of the Apple shares and bought purchased the same amount of shares as he originally owned two days after the sale. During the year, Mr. Trevelayn also sold a collectible figurine that was given to him when was a child. While it had only cost his parents $500, it had increased significantly in value. It was sold through a local antique store for $4,500. The store charged a commission of $450. Mr. Trevelyan has a net rental loss of $6,000 from a residential rental property. Mr. Trevelyan earned $8,600 in net business income from creating websites for local businesses. Required Ignore GST considerations in making your calculations. Calculate Mr. Trevelyan’s maximum deductible RRSP contribution for 20XX. (20 marks) Assume that Mr. Trevelyan contributes the amount calculated in Part A to his RRSP. Calculate Mr. Trevelyan’s 20XX net employment income. (30 marks) Calculate Mr. Trevelyan’s Net Income for Tax Purposes and Taxable Income. (25 marks) Calculate Mr. Trevelyan’s Federal Tax Payable before consideration of any income tax that would have been withheld or paid in instalments. (25 marks)