Question

Martha Shine has provided you with the following information for 20xx: She owns rental properties originally valued at $275,000. (Property 1: land $70,000, building $55,000) (Property 2: land $90,000, building $60,000) The buildings are Class 1 (4%) properties. -Net rental income before CCA in 20xx was $11,000. -The UCC on building 1 at the beginning of 20xx was $50,000. -The UCC on building 2 at the beginning of 20xx was $40,000. - Property 2 was sold in 20xx for $250,000 (and $200,000, building $50,000) She owns shares in ABC Inc. (a CCPC) valued at $50,000. -She received $5,000 in non-eligible dividends on the shares in 20xx. Martha purchased a 5-year GIC two years ago for $30,000. -Interest earned in 20xx was $1,000. Martha worked full-time as a baker in 20xx, earning a gross salary of $45,000. Martha is in a 45% tax bracket. Required: Calculate Martha's net income for tax purposes in 20xx in accordance with Section 3 of the Income Tax Act. Martha will take the maximum CCA allowed this year on her rental properties. (Assume the tax year is 2019.)

Answer 1

Calculation of Martha's Net Income for Tax Purpose

Rental Income - 11000

Less : CCA on 1st Property - 3600 (4% of 90,000)

Net Rental Income - 7400

Profit on sale of 2nd Building : 121,600 (250000-90000-(40000-1600))

Dividend Income : 5000

Interest Income : 1000

Salary : 45000

Martha's Net Income : 180,000