Taxation and Investment Analysis: Problems and Solutions

Answer to Problem 1 Reference 12(1)(c)1. Joint Account Interest1,000 12(1)( c)2. Tax Assessment Interest500 12(4)3. Term Deposit Interest (anniversary date method)2,000 12(1)(c)4. Bond Interest (Jan 1 to Nov 30)2,287 = 5% x 334/365 x 50,000 = 2287 38(a)Taxable capital gain (see 17. below) Proceeds = 62,287 - 2,287 interest = 60,000 TCG = ½ (60,000 - 50,000) = 5,000 12(1)(c), 20(14)(b)5. Interest = $1,000 - $830 (830 = $1,000 x 153/184)170 166. T Bill ($50,000 - $49,000)1,000 7.RRSP- 8. TFSA- 12(1)(j), 82(1)9. Canadian Eligible: 20,000 x 1.3827,600 12(1)(j), 82(1)10 Canadian Non Eligible:10,000 x 1.1511,500 12(1)(k)11. U.S: 18,500 plus 1,500 withholding tax20,000 83(2)12. Capital dividend- 248(1)re amount13. Stock dividend: 2 x 50 x 1.38138 14. Rental income (see Note below)- 20(1)(c)15. Interest expense-50,000 16. Safety deposit box fee- Income from property (subdivision b)16,195 38(a)17. Taxable capital gain on bond from 4. above (subdivision c) = ½ [(62,287 - 2,287) - 50,000]5,000 Net income and taxable income21,195 117(2)Federal Tax @ 15%3,179 118(1)(c)Basic credit 14,398 x 15%-2,160 121Dividend tax credit 9. Canadian Eligible: 7,600 GU x 6/11-4,145 10. Can. Non Elig: 1,500 GU x 9/13-1,038 13. Elig Stock dividend: 38 GU x 6/11-21 126(1)Foreign tax credit-1,500 Federal tax