Question

Determine the maximum amount of 2018 personal tax credits, including transfers from a spouse or dependant, that can be applied against federal Tax Payable by the taxpayer in each of the following independent Cases. A calculation of Tax Payable is NOT required.

1.     Mr. Holm has Net Income for Tax Purposes of $55,000, all of which is investment income. He is single and provides support for his mother. His mother is a widow who resides in Latvia and has income of $1,100 per year.

2.     Mrs. Thomas has Net Income for Tax Purposes of $250,000, all of which is employment income. Her employer has withheld and remitted the required EI and CPP amounts. Mrs. Thomas was married on December 1, 2018. Her wife, a nursing student, had salary of $21,000 for the period from January 1 to November 30, 2018 and $3,200 for the month of December 2018.

3.     Mr. Jackson has Net Income for Tax Purposes of $75,000, all of which is rental income. He lives with his common-law wife and their 2 children. The children are 7 and 8 years of age and have no income for the year. His wife has Net Income for Tax Purposes of $8,500.

4.     Mrs. James is married and has Net Income for Tax Purposes of $110,000, none of which is employment income or income from self-employment. Her 19-year-old dependent daughter attends university. Her husband has Net Income for Tax Purposes of $10,500, and her daughter has Net Income for Tax Purposes of $8,500. Her daughter does not wish to transfer her tuition, education or textbook credits.

                5.     Mr. Morant is 68 years old and has Net Income for Tax Purposes of $29,500, which is comprised of Old Age Security benefits and pension income paid out of his Registered Retirement Income Fund. He is single and he has a son who is 13 years old and is deaf. He has no income of his own.

6.     Ms. Young is divorced and maintains a residence far from her former spouse. She has custody of the 2 children from the marriage. They are aged 9 and 12 and in good health. They both earn $750 from paper routes. Her Net Income for Tax Purposes is $72,000, all of which is spousal support payments.

Answer 1

2.Mrs Thomas and her wife have income from different sources therefore they are liable to pay federal tax differently. Mrs Thomas will pay tax on $250000 and Mrs Thomas wife would pay on $24200.

3.Mr Jackson has rental income of $75000 which is taxable and unless Mrs Jackson has received the income from his husband it is not taxable therefore we asume that mrs jackson has earned the income seprately so taxable amount for her would be $8500.

4.Mrs James taxable income is $1,10,000.

Mr. James taxable income is 10,500 as question dosent tell that husband income is from wife sources.

Now, Daughter would also be sepratly taxable as she is dependent but not minor. For the provisions of clubbing child should be minor and dependent.

5.Income of the minor kids is clubbed in the income of father or mother whichever is higher but in the case of divorce that is legal sepration of parents income is clubbed in the income of parent having custody therefore total taxable income of Ms. Young would be 72750.