Detailed Tax Calculation and Analysis Project, FIN 3020, Winter 2020

This document presents a comprehensive tax calculation project for a client named Rosy Evans. It begins with the calculation of her total income, net income before adjustments, and tax liability for 2019, resulting in a tax refund. The project then provides recommendations on various tax matters, including medical expense deductions for a dependent, the benefits of RRSP contributions in reducing taxable income, and the potential tax advantages of taking an MBA course. Furthermore, it addresses the tax implications of car lease rentals, concessional loans, and stock options. Detailed calculations are provided for the concessional loan, and the document analyzes the impact of ABC Ltd's status (CCPC or not) on stock option taxation. Finally, the project includes the calculation of rental income from a property and provides a breakdown of related expenses to determine the net rental income, which is crucial for accurate tax reporting. This assignment is a practical application of tax principles, offering valuable insights into personal and business tax planning.

Running head: TAX
Tax
Name of the Student:
Name of the University:
Authors Note:

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TAX
Memo
Date: April 19, 2020.
To: Ms Rosy Evans
From: Tax expert.
Sub: Calculation of taxable income, tax liability and advice on certain tax matters.
As can be seen from the income tax return that the total income of Ms Rosy Evans for 2019 is
$88,895. The net income of the assesse before adjustment is $84,395 and total income tax
liability is $10,519.07. Since $12,000 has already been paid as quarterly tax hence, Rosy is
eligible to receive $1,704.93 as tax refundable for the year 2019.
Recommendation on different tax matters:
I. Medical expenses incurred on blind mother of the assesse is eligible for deduction provided
all necessary conditions have been met. However, since, no information is provided in the
case study regarding the compliance by the assesse hence, only $4,500 has been deducted as
dependant support expenditure.
II. RRSP contributions help in reducing the taxable income and income tax liability of the
contributor. Thus, Ms Rosy Evans could have reduced her taxable income and resultant
income tax liability by contributing significant amount money in RRSP. In case $69,000
would have been contributed the taxable income and tax liability of the assesse would have
reduced significantly.
III. Taking MBA course in 2025 again would have made Rosy eligible to deduct tuition fees
reducing tax liability of her.

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IV. By contributing to TSFA Ms Rosy could have made tax free savings in the account and could
also have made tax free withdrawals from the account. Thus both taxable income and tax
liability of the assesse would have reduced.
V. The total amount of lease rental for the car is $11,400 if the car was taken on lease for whole
of the year. The amount of operating expenses of the car for the year was $2,500. Thus, total
cost related to the car is $13,900. However, since 200 km out of 2000 km was used for
employment purposes hence, $12,510, i.e. 90% of total expenditure should have been added
to Rosy’s income to determine her taxable income for the year.
VI. In respect of concessional loan $3,250 should have been added to the total income of Ms
Rosy to calculate her taxable income for the year and resultant income tax liability. The
difference between the prescribed rate of interest and the actual interest rate charged on the
loan provided to the assesse is the main consideration in determining the amount to be added
to the employment income.
Calculation: {100000 x (4%-1%) x 1/12} + {(100000 x (5%-1%) x 9/12)} = $3250.
VII. In case ABC Ltd would have been a CCPC then the issue of stock option and subsequent
utilization of the stock option by the employee would not have resulted in increase of
employment income. However, in this case the net benefit from stock option shall be
included along with other employment income to calculate the net employment income for
tax purposes.