Question

Molly live in Canada, She is a single parent with two kids the age of 4 and 7. She had the following cash inflow: -Employment income 20,000 -Dividends from CCPC: 10,000 She had the following cash outflow: -RRSP contributions: 1230 Molly had $1,200 federal tax withheld from her employment income, but did not pay any installments. The following year, Molly sold the following: -Share capitals POD = 1270, ACB = 2300 -Non capital assets 4000/12500 She had a previous net capital loss of $6,000 Throughout the year, she had the following medical expenses: -Molly 750 -Both children 1500 (they had no net income) Molly also made political contributions of $300 Required:

1) Determine the net employment income

2) The taxable income

3) The refundable tax credit or due balance 4) Omitted and brief summary why

Answer 1

Answer 1:

Net employment income
Particulars	Amount ($)
Employment income is taxable income	20000
Less: Federal tax withheld	1200
Net employment income	18800

Answer 2:

Particulars	Amount ($)	Amount ($)
Employment income is taxable income	20000
Dividend from CCPC is a foreign income and not dividend	10000
RRSP contribution is taxable as it is not considered a qualified plan in the US	1230
Taxable income before adjusting other income		31230
Add: Income from capital gain
Sale proceeds	12500
Less: Cost base	4000
	8500
Less: Previous capital loss	6000
Taxable capital gain		2500
Taxable income		33730

Answer 3:

Income tax rate applicable since the taxable income is below $46,605	15%
Particulars	Amount ($)
Taxable income	33730
Income tax liability (33730 x 15%)	5059.5
Less: Federal tax withheld	1200
Income tax due	3859.5

Answer 4:

Following are the reasons for different items:

Employment income is taxable income

Dividend from CCPC is a foreign income and not dividend

RRSP contribution is taxable as it is not considered a qualified plan in the US

Income tax rate applicable since the taxable income is below $46,605.