Question

Mitch Marner has the following information related to his various investments as of
December 31, 2019:

Cash dividends received from investment in common shares of Canadian
Resident public corporations……………………………………………………………..24,016

Cash dividends received from common shares in US corporations (net of $3,016
of foreign withholding taxes; all in Canadian dollars)………………………………….17,000

Interest earned on 2018 personal income tax assessment………………………………416

Interest earned on joint bank account with his spouse (spouse contributes
equally)……………………………………………………………………………………....1,750

Interest earned on his investment account (not joint) with his investment
Broker…………………………………………………………………………………………..900

Interest on short-term investments:
               $20,000 term deposit taken out November 30, 2019 (interest at maturity in
                 six months)

                            Accrued interest from December 1 to December 31, 2019………………85

$200,000 GIC purchased November 1, 2018 (interest payable at maturity on
October 31, 2021)
                     Accrued interest from November 1, 2018 to October 31, 2019…….16,000
                     Accrued interest from January 1, 2019 to December 31, 2019…….16,214

Government of Canada Treasury Bills purchased for $9,009 on January 3,
2019
             Amount received on maturity on December 31, 2019………...……..10,000

Rental details from operation of two separate rental properties:
                                                                                             Property A                     Property B
Gross rental revenue……………………………………………$ 31,000                        $ 45,000
Utilities……………………………………………………………. 5,000    8,000
Property taxes…………………………………………………… 2,400    3,500
Repairs…………………………………………………………… 1,500                                 4,800
Mortgage interest……………………………………………….. 20,000                              32,000
Opening UCC……………………………………………………. 368,209                          520,225

Interest expenses paid during 2019:
                   Interest on vacant land (purchased in 2014, the land does not
                    generate any income)……………………………………………………………10,000

                    Interest on bank line of credit used for investing in shares
                   described above………………………………………………………………....50,000

                   Interest on loan to acquire an automobile for his daughter for
                   her 18th birthday…………………………………………………………………..3,216

Required:
Based on the above, Mitch has asked you to calculate his income for the year. He would
also like you to comment on the income tax implications of items not included in your
calculations.

it is a canadian taxation laws.

Answer 1

Mitch Marner

2019 - Income

The taxable amount of dividend 24,016

(Cash dividends from shares of Canadian shares)

Interest and other investment income 19,191

(Interest - 416+875(1/2 of 1750)+900 and

cash dividends from US shares)

Profit on sale of Government of Canada Treasury bills 1,000

(Proceeds 10,000 - basis 9,000)   

Rental Income (1,200)

(Property A - 31,000-28,900 = 2,100

Property B - 45,000-48,300 = (3,200)

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Total Income 43,007

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1. Interest on short-term investments - maturity proceeds with interest will be available after 6 months - so, will be reported in his 2020 tax return.

2. Accrued interest cannot be written off unless the client as any income earned out of it - the amounts will be carried forward and will be deducted in the year client earns income from such bonds.

3. Interest expenses are of personal in nature and not tax-deductible.