Molly Malone Statement of Income

Running head: BTAX 1
BTax 1
Name of the Student:
Name of the University:
Authors Note:

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Contents
Answer 1:.........................................................................................................................................2
Answer 2:.........................................................................................................................................7
Answer 3:.......................................................................................................................................10
References:....................................................................................................................................13

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Answer 1:
Molly Malone
Statement of Income from Self-employment
Period Ended December 31, 2018
Particulars Amount ($) Amount ($)
Revenue:
Commission received 50,000.00
Add: Commission billed but not yet received 5,000.00
Gross revenue 55,000.00
Expenses:
Bad debt 500.00
Salary to Molly's husband (allowed as per market rate) 22,500.00
Loss on sale of vehicle (80%0 11,975.89
Vehicle operating costs (1500 x 80%) 1,200.00
Entertainment expenses (accommodation and meals) 1,800.00
Interest paid on vehicle loan (80%) 1,280.00
Convocation expenses (including meals) 1,200.00

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Proportion of house expenditure 1,362.50
Office supplies 650.00
Telephone expenditure 1,600.00
Tennis club membership is not business expenditure -
CCA (as per schedule) 5,038.16
49,106.55
Net income from self-employment 5,893.45
Notes:
I. Total commission received is taxable income of self-employed business of Molly
Malone hence, the entire amount of commission received by her is to be considered
for income tax purpose.
II. Commissions earned and billed but not received has also been considered assuming
that the accrual basis of accounting is followed by Molly Malone. Since, the amount
billed but jot received has been considered hence, the expected bad debt of $500 has
also been deducted as bad debt is allowed as deduction from gross revenue for
income tax purpose in the country ("Income Tax Provisions of the Chandler Act",
2019).
III. Salary paid to employee including the owner of the business or any of owner’s
relatives is allowed as deduction provided the same is in line with the market rate.

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Since, the market rate for the book keeping services is @$20 per hour hence, the
salary of $40 per hour paid to Molly’s husband is not allowed as deduction. Rather
only $20 per hour for 1125 hours is allowed as deduction from gross revenue of self-
employed business (McFetridge & May, 2018).
IV. The vehicle purchase is used to the extent of 80% for the business only hence, 80% of
all expenses related to the operation of the vehicle will be allowed as deduction from
business revenue (Schoney & Rinholm, 2018).
V. The capital gain or loss from sale of the vehicle shall also be considered in computing
the taxable income of Molly for the year however, only to the extent of 80% of such
gain or loss shall be considered for computation net income of self-employed
business of Molly.
VI. Auto and travel expenses shall be allowed as deduction. Meal and accommodation
expenses shall be allowed as deduction under entertainment expenses.
VII. Interest paid on the loan of vehicle shall also be allowed as deduction but only to the
extent of 80% since the vehicle was used 80% times for business and related activities
with rest for personal use.
VIII. Assuming that the three conventions attended by Molly is for business purpose thus
all expenses related to these conventions including accommodation and meal shall be
allowed as business expenses and accordingly shall be deduced from revenue to
determine the taxable income of self-employed business of her (Noked, 2018).
IX. Computer is a class 45 asset and accordingly CCA rate for the asset is 45%. However,
since only 75% of the use was for business related activities hence, 75% of CCA shall
be allowed as deduction from business revenue.

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X. Accounting software package used for 100% business hence, the entire CCA shall be
allowed as deduction from business revenue. Accounting software is a class 10 asset
and accordingly, CCA shall be calculated at the rate of 30%.
XI. Office furniture belongs to class 8 and CCA rate for such asset is 20%.
XII. Since, the business activities were conducted from Molly’s house hence,
proportionate amount of expenditures incurred on house shall be allowed as business
expenses. Here it has been specifically mentioned that the business uses 10% of the
floor area of Molly’s house hence, 10% of total house related expenditure shall be
allowed as deduction from business revenue to compute the taxable income of Molly
("Taxation. Income Tax. Effect of Reorganization Provisions", 2019).
XIII. Principal amount paid on house mortgage is however, not allowed as deduction
hence, the same has not been considered here.
XIV. Cost of office supplies, business telephone line are eligible expenses and accordingly,
deducted to compute taxable income from self-employed business of Molly.
CCA Schedule:
1 2 3 8 9 14 17 18
Class
number
UCC @
beginning
of year
Cost of
additions
Proceeds
of
disposition
UCC
column 2
+ column
3 –
column 5
CCA CCA UCC @ end
of year
(not to Rate

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exceed the
capital
cost)
8 1,000.0
0
1,000.0
0
20% 100.8
2
8,002.00
10 800.0
0
800.0
0
30% 120.9
9
679.01
10.1 58,000.0
0
20,000.00 38,000.0
0
30% 4,391.0
1
33,608.99
45 2,500.0
0
2,500.0
0
45% 425.3
4
2,074.66
5,038.1
6
Note:
In case of CCA calculation the 50% rule has not been used in the year as the year is already
consist of 184 days only thus, the calculation of CCA has been made proportionately for 184
days in respect of the assets that have been purchased in July and for assets purchased later the
number of days taken accordingly to calculate the cost of asset.

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In the above schedule CCA has been calculated only for business portion as the proportion of the
asset used for personal use is not eligible for deduction from business revenue. Thus, vehicle and
computer 80% and 75% respectively have been considered for calculation of CCA for the year.
However, UCC ending balance reflects the book value of these assets in their entirety and not
only for the portion used in business (Verma, 2019).
Answer 2:
Part a:
Mr. Slumlord
Statement of Rental Income
Year ended December 31, 2018
Particulars Amount ($) Amount ($)
Rental revenue 42,000.00
Less: Rental expenses
Property taxes 11,000.00
Insurance 3,500.00
Repairs 12,700.00
Mortgage interest 5,500.00
Salaries of superintendent 8,300.00

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Total rental expenses 41,000.00
Rental income (prior to terminal loss and CCA) 1,000.00
Less: Terminal loss on sale of building B (note I) 25,000.00
Rental loss before CCA (24,000.00)
Less: CCA 22,950.00
Net rental loss (46,950.00)
Working note:
Workings:
Terminal profit / (loss) on building B
Sale proceeds 500,000.00
Less: value of the building as per appraiser 525,000.00
Terminal loss (25,000.00)
CCA schedule:
1 2 3 8 9 14 17 18
Class UCC @ Cost of Proceeds UCC column 2 CCA CCA UCC @

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numbe
r
beginning
of year
additions of
disposition
+ column 3 –
column 5
end of year
(not to
exceed the
capital
cost)
Rate
1 120,000.0
0
50,000.
00
500,000.0
0
(330,000.00) 4% 6,800.0
0
3 315,000.0
0
315,000.00 5% 15,750.0
0
299,250.0
0
8 2,000.0
0
2,000.00 20% 400.0
0
1,600.0
0
22,950.0
0
Part b:
Particulars Land ($) Building
($)
Sale proceeds 100,000 400000

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.00
Less: Legal expenses of selling the
property
1,000
.00
4000
99,000
.00
396,000.
00
Less: Value of the property
ACB 105,000
.00
420,000.
00
Capital gain / (loss) (6,000
.00)
(24,000.0
0)
Taxable / capital loss (1/2) (3,000
.00)
(12,000.0
0)
Therefore, allowable capital loss is $15,000.
Answer 3:
Part (a):
Particulars Amount ($) Amount ($)
Sale proceeds (200 x 30) 6,000.00
Less: ACB (Note I)

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ACB (200 x 23.20) 4,640.00
Taxable capital gain 1,360.00
Working note I:
Date Purchase Sales Amount ($) Balance
Amount ($) Shares Per share ($)
02-Feb-17 200 shares 3,600.00 3,600.00 200 18.00
15-Dec-17 50 shares 800.00 2,700.00 150 18.00
05-Jan-18 150 shares 3,000.00 5,700.00 300 19.00
30-Jun-18 300 shares 7,500.00 13,200.00 600 22.00
02-Jul-18 150 shares 4,200.00 17,400.00 750 23.20
Part (b):
Items / Assets Sale proceeds ($) Cost ($) Capital gain / (loss) ($)
Painting 3,400.00 900.00 2,500.00
Computer 1,200.00 1,500.00 (300.00)
Diamond ring 800.00 1,000.00 (200.00)

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References: