Thato Smit has provided you with the following information for 2020:
That 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 2020 was $11,000.
$\bullet$The UCC on building 1 at the beginning of 2020 was $50,000.
$\bullet$ The UCC on building 2 at the beginning of 2020 was $40,000.
$\bullet$ Property 2 was sold in 2020 for $250,000 (land $200,000, building $50,000)
Thato owns shares in ABC Inc.(a CCPC) valued at $50,000, and received $5,000 in non-eligible dividends on the shares in 2020.
Thato purchased a 5-year GIC two years ago for $30,000, and the interest earned in 2020 was $1,000.
Thato worked full-time as a baker in 2020, earning a gross salary of $45,000.
Thato is in a 45% tax bracket.
Required:
Calculate Thato's net income for tax purposes in 2020 in accordance with Section 3 of the Income Tax Act (exclusive of the enhanced CPP).Thato will take the maximum CCA allowed this year on the rental properties.

Question

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The Answer is

\begin{array}{|l|r|l|l|}\hline ext { ITA 3(a): } & & \\hline ext { Employment income } & &&\$45,000.00 \\hline ext { Property income: } & & \\hline ext { Rental income } & \$ 11,000.00 & \\hline ext { CCA-Bldg. } 1(\$ 50,000 imes .04) & -\$ 2,000.00 & \\hline ext { Recapture - Bldg. 2 (UCC of } \$ 40,000 ext { less } & \$ 10,000.00 \ ext { the lower of cost or proceeds, } \$ 50,000 ext { ) }\\hline ext { Total rental income } & \$ 19,000.00 & \$ 19,000.00 \\hline ext { Dividend income }(5,000 imes 1.15) & & \$ 5,750.00 \\hline ext { Interest income } & & \$ 1,000.00 \\hline ext { Total property income } & & \$ 25,750.00 &\$25,750.00\\hline ext { ITA 3(b): } & & \\hline ext { Capital gain: } & & \\hline ext { Land: Proceeds } & \$ 200,000.00 & \\hline ext { ACB } & \$ 90,000.00 & \\hline ext { Capital Gain } & \$ 110,000.00 \\hline ext { Taxable Capital Gain } & \$ 55,000.00 & & \$ 55,000.00 \\hline ext { Net Income for Tax Purposes } & & & \$ 125,750.00 \\hline ext { (Enhanced CPP is excluded from exam } & & & \\hline ext { questions until Chapter 9.) } & & &\\hline\end{array}

Thato Smit Has Provided You with the Following Information for 2020