Detailed Income Tax Analysis Report for Rachel and Rolando, 2017

This report provides a detailed analysis of the income tax calculations for Rachel and Rolando, both self-employed individuals in Canada for the year 2017. The report begins with a memo summarizing the clients' income sources, including business revenue, investment income, and RRSP contributions. It details the calculation of Rachel's net income, considering business expenses, asset costs, and machinery costs, leading to the determination of her taxable income and federal tax liability. Similarly, the report outlines the calculation of Rolando's net and taxable income, considering employment income, RRSP contributions, and various deductions such as pension adjustments and vehicle costs. The report then calculates Rolando's federal tax liability, including CPP contributions and union dues. The analysis highlights the differences in their tax situations, offering insights into the impact of deductions and income sources on their overall tax obligations. The report concludes with a list of references. This report is contributed to Desklib, a platform providing study tools for students.

TAXATION
TABLE OF CONTENT

S
MEMO.......................................................................................................................................1
Net income of Rachel.................................................................................................................2
Taxable income of Rachel for the year 2017.............................................................................3
Federal tax..................................................................................................................................3
Net income of Rolando..............................................................................................................4
Taxable income of Rolando for the year 2017...........................................................................4
Federal tax..................................................................................................................................5
REFERENCES...........................................................................................................................6

MEMO
To
MR and Mrs sorter
Sub: Summary of the net tax returns
Introduction
Tax is a global obligation imposed on an individual or a group of individuals for the income
earned by them in a particular financial year. Tax is levied on the employment income
whether working as an employee of a company or owning a business as a self-employed are
required in paying the tax on various rates applicable to different kind of individuals. In the
current case business income of Mr. Roland and Mrs. Rachel is used to ascertaining the
amount of total tax levied on their income (Kaden, Grussu, Ning Tax & Veraart, (Eds.)
2018). A Rachel and Rolando life in Canada that means Canadian taxation rules and
regulations is used to ascertain their tax liability for the year 2017. Rachel and Roland both
are self-employed who runs their business separately for which they have to pay the tax
amount.
Tax summary
Tax is separately calculated for both the clients such as Rachel and Rolando as their business
income earned separately from each other. The first talk about Rachel’s income, Rachel is a
lawyer by profession who earned legal revenues of $411000 as business revenue. Investment
income of Rachel includes capital gains of $12750, eligible dividends of $11500 and interest
income of $6300 which in total accounts for $30550. RRSP contribution of the client is
$5700 which is a different amount of the additional contribution of $14500 and un-deducted
contribution of $8800. 50% of the spouse pension income of $2300 is credited in the account
of Rachel which in total her total income accounts for $449550. In ascertaining the amount of
net income, all the expenses incurred in a business and the personal expenses of the client is
considered to know the net income of Rachel for the year are $223938.6 which includes
deductions of RRSP worth of 20880 which is 18% of the earned income of $116000, total
asset acquisition cost of $28000, cost of operating is $113000. In determining the taxable
income of Rachel, non-capital loss of $82385 and a capital gain of $12750 is deducted to
determine the taxable income of $128803 on which tax is payable of $47341.63 which is
rounded off to $47342.
Now talking about the tax of another client that is Mr Roland, Whose total income includes
Income from employment worth of $71936 which have various components such as salary of
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$66500, RPPC of $4600 and EI premium worth of $836. There is no income from
investments of the client and RRSP income of the client worth of $1000 which created the
total income of $72936 (Arnold, 2018). Net income of Roland is $48906.71 which includes
various deductions deducted from the total income worth of $8640 as a RRSP deduction,
Pension amount of $4100, cost of vehicle worth of $5689.286 which is ascertain by
considering the personal km run by Roland, hotel cost of $2800 and food cost of $930 which
in total amounts to $3730 is forfeited as an employer gives a total allowance of $3800. So the
total deduction is worth of $24029.29 to ascertain the amount of net income of worth
$48906.71. Tax applicable on the taxable income of Mr Roland is $7501 along with the CPP
contribution of $2564 and union dues of $460 which increases the federal tax of Mr Roland
to $10525. Tax of Rachel is $47342 which is $36817 more than her spouse Rachel is due to
less deduction deducted from the income of Rachel needs to control its earnings of the year.
Yours Affectionately
Tax consultant
NET INCOME OF RACHEL
Calculation of Total income of Rachel
Income from employment
Business revenue from legal practice 411000
Total income from employment 411000
Income from Investments
Capital Gains 12750
Eligible Dividends 11500
Interest income 6300
Total investment income 30550
Income from RRSP
Additionally contribution 14500
Un-deducted contribution 8800
Total income from RRSP 5700
Pension income transferred from spouse 2300
Total income 449550
Calculation of Net income of Rachel
Total income 449550
Less: deductions
RRSP Deduction
Earned income 116000
18% of earned income 20880
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Cost of operating expenses
Building operating costs 29400
Salaries and wages 53200
office costs 21800
Meals with clients 8600
Total costs 113000
Assets costs
A client list from a retiring lawyer 23000
New laptop computer 1400
Applications software 3600
Total assets acquisition costs 28000
Machinery costs
Cost of vehicle 7571.429
Operating costs 4200
Total machinery costs 11771.43
Capital costs of furniture 29500
Family's medical expenses 22460
Total deductions 225611.4
Net income 223938.6
TAXABLE INCOME OF RACHEL FOR THE YEAR 2017
Calculation of Taxable income
Net income 223938.6
Less:
Non-capital losses
UCC value of furniture 13594
Less: Capital costs of furniture 29500
Non-capital losses -15906
UCC value of building 433521
Cost of building 500000
Non-capital losses -66479
Capital gain 12750
Taxable income 128803.6
FEDERAL TAX
Calculation of federal tax
Taxable income 128803.6
First 45916 6887.4
45916-91831 9412.575
91831-142353 31041.66
Total tax 47341.63
Tax rounded up 47342
3

NET INCOME OF ROLANDO
Calculation of Total income of Roland
Income from Employment
Salary 66500
RPPC 4600
EI premiums 836
Total income from employment 71936
Income from investment
Income from RRSP
Unused contribution 5500
Additional 4500
Income 1000
Total income 72936
Calculation of Net income
Total income 72936
Less deduction
RRSP deduction
Earned income 48000
180% of earned income 8640
Pension adjustment 4100
Cost of vehicle 5689.286
Operating costs 5600
Total cost of travel 11289.29
Hotel costs 2800
Food on out of town trips 930
Total 3730
Allowance 3730
Total deductions 24029.29
Net Income 48906.71
TAXABLE INCOME OF ROLANDO FOR THE YEAR 2017
Calculation of taxable income
Net income 48906.71
Less deductions 0
Taxable income
FEDERAL TAX
Calculation of federal tax
Taxable income 128803.6
4

First 45916 6887.4
45916-91831 9412.575
91831-142353 31041.66
Total tax 47341.63
Tax rounded up 47342
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