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A Review of Net Income for Tax Purposes

Alan Active holds a job, operates a small farm, and makes numerous investments. A description of his financial activities for 2022 is given below.

1. Alan is a lawyer and is employed in the legal department of a large public corporation. He received a gross salary of $96,000. In addition, the corporation provided the following items of remuneration:

• A car allowance of $700 a month to cover costs of travel in the performance of his duties; during 2022, Alan used his own car to travel from his home to work and back and rarely used it during working hours on company business.
• A contribution of $3,000 to a deferred profit-sharing plan.
• A group term life insurance policy for $100,000 (premium cost - $1,400).
• A cash bonus of $5,200 that was awarded to him in the previous year and that he received in the current year.

1. Alans employer gives all senior executives the option to acquire a certain number of shares of the corporation at a price that is guaranteed for two years. In 2021, the employer granted Alan an option to purchase up to 5,000 of its shares for a price of $10 per share. At the time the option was granted, the shares were valued at $10.75 per share. During 2022, Alan purchased 800 shares at a cost of $10 per share. At the date of purchase, the corporations shares were trading at $14 per share.
2. Alan purchased a small parcel of land (20 hectares) in 2022 and began raising goats. In 2022, he lost $1,000 from this operation.
3. In 2022, Alan purchased 1,000 shares of Canadian public corporation X for $20 per share and received a stock dividend of 100 additional shares of the same class. During the year, he sold the 100 shares at $24 per share, for the same value as on their date of issue.
4. Three years ago, Alan purchased three residential rental properties and has provided you with the following information:

	Property 1			Property 2			Property 3
Land cost	$	10,000		$	4,000		$	8,000
Building cost		60,000			40,000			45,000
Building UCC (December 31, 2021)		52,000			37,000			40,000
2022 net rents (before CCA)		3,000			(5,000	)		4,000

In 2022, Alan sold property 1 for $80,000 (land - $12,000; building - $68,000), and property 2 for $50,000 (land - $6,000; building - $44,000). Also, in 2022, he purchased property 4 for $90,000 (land - $30,000; building - $60,000). In 2022, property 4 had net rentals before capital cost allowance of $1,000.

1. During the year, Alan gifted 1,000 shares of Shell Canada Ltd. (a public corporation) to his daughter. The shares had cost him $10 each and had a value at the time of the gift of $15 each. In 2022, his daughter (16 years old) received dividends of $4,000; she then sold the shares for $30 each.
2. In 2022, Alan gifted 2,000 shares of Exxon Ltd. (a public corporation) to his spouse. The shares had a value of $40 each at the time of the gift. He had paid $30 per share several years before. His spouse sold the shares in 2022 for $22 per share during a market slump.
3. Alans mother died in 2021 and left him her house. The house cost $40,000 at the time of purchase and had a value in 2021 of $60,000. Alan sold the house in 2022 for $66,000.
4. Three years ago, Alan purchased 15% of the shares of two private corporations. Each carried on an active business. He sold the shares of both corporations in 2022. Information relating to the shares is as follows:

	PC 1			PC 2
Cost	$	40,000		$	30,000
Proceeds of sale		56,000			20,000
Terms of payment	$	8,000	/yr for 7 yrs	All cash

1. In 2022, during a market slump, Alan sold 500 shares of public corporation A for $30,000; the shares had cost him $40,000. Two weeks later, as the market began to strengthen; he purchased 500 shares of the same corporation for $29,000.
2. Alan also sold the following assets in 2022:

	Cost			Proceeds
Public corporation B shares	$	10,000		$	10,000
Public corporation C shares		47,500			14,000
Stamp collection		8,000			11,400
Jewellery		6,000			1,000
Boat		5,000			2,000
Stereo set		200			600

1. Alan had the following additional receipts in 2022:

Dividends from Canadian public companies	$	5,500
Interest on bonds		4,000
Lottery winnings		6,000

13. Alan paid out the following in 2022:

To purchase a computer for use at home when working on
his employers business	$	1,900
Interest on bank loan to purchase shares of public corporation		2,000
Interest on house mortgage (mortgage funds of $60,000 were used:
$40,000 for the purchase of the house, $20,000. for the
purchase of shares)		6,000
Lump-sum alimony settlement to ex-spouse		9,000
Tuition fees for attending university		1,000
Donations		4,000
Gift to a registered federal political party		1,000
Contribution to an RRSP		2,500
Annual dues to the provincial law society		1,700

Required: Calculate Alans net income for tax purposes for 2022. (Enter deductions with a minus sign (-). If a number should be zero, enter 0.)

A Review of Net Income for Tax Purposes

Alan Active holds a job, operates a small farm, and makes numerous investments. A description of his financial activities for 2022 is given below.

1. Alan is a lawyer and is employed in the legal department of a large public corporation. He received a gross salary of $96,000. In addition, the corporation provided the following items of remuneration:

• A car allowance of $700 a month to cover costs of travel in the performance of his duties; during 2022, Alan used his own car to travel from his home to work and back and rarely used it during working hours on company business.
• A contribution of $3,000 to a deferred profit-sharing plan.
• A group term life insurance policy for $100,000 (premium cost - $1,400).
• A cash bonus of $5,200 that was awarded to him in the previous year and that he received in the current year.

1. Alans employer gives all senior executives the option to acquire a certain number of shares of the corporation at a price that is guaranteed for two years. In 2021, the employer granted Alan an option to purchase up to 5,000 of its shares for a price of $10 per share. At the time the option was granted, the shares were valued at $10.75 per share. During 2022, Alan purchased 800 shares at a cost of $10 per share. At the date of purchase, the corporations shares were trading at $14 per share.
2. Alan purchased a small parcel of land (20 hectares) in 2022 and began raising goats. In 2022, he lost $1,000 from this operation.
3. In 2022, Alan purchased 1,000 shares of Canadian public corporation X for $20 per share and received a stock dividend of 100 additional shares of the same class. During the year, he sold the 100 shares at $24 per share, for the same value as on their date of issue.
4. Three years ago, Alan purchased three residential rental properties and has provided you with the following information:

	Property 1			Property 2			Property 3
Land cost	$	10,000		$	4,000		$	8,000
Building cost		60,000			40,000			45,000
Building UCC (December 31, 2021)		52,000			37,000			40,000
2022 net rents (before CCA)		3,000			(5,000	)		4,000

In 2022, Alan sold property 1 for $80,000 (land - $12,000; building - $68,000), and property 2 for $50,000 (land - $6,000; building - $44,000). Also, in 2022, he purchased property 4 for $90,000 (land - $30,000; building - $60,000). In 2022, property 4 had net rentals before capital cost allowance of $1,000.

1. During the year, Alan gifted 1,000 shares of Shell Canada Ltd. (a public corporation) to his daughter. The shares had cost him $10 each and had a value at the time of the gift of $15 each. In 2022, his daughter (16 years old) received dividends of $4,000; she then sold the shares for $30 each.
2. In 2022, Alan gifted 2,000 shares of Exxon Ltd. (a public corporation) to his spouse. The shares had a value of $40 each at the time of the gift. He had paid $30 per share several years before. His spouse sold the shares in 2022 for $22 per share during a market slump.
3. Alans mother died in 2021 and left him her house. The house cost $40,000 at the time of purchase and had a value in 2021 of $60,000. Alan sold the house in 2022 for $66,000.
4. Three years ago, Alan purchased 15% of the shares of two private corporations. Each carried on an active business. He sold the shares of both corporations in 2022. Information relating to the shares is as follows:

	PC 1			PC 2
Cost	$	40,000		$	30,000
Proceeds of sale		56,000			20,000
Terms of payment	$	8,000	/yr for 7 yrs	All cash

1. In 2022, during a market slump, Alan sold 500 shares of public corporation A for $30,000; the shares had cost him $40,000. Two weeks later, as the market began to strengthen; he purchased 500 shares of the same corporation for $29,000.
2. Alan also sold the following assets in 2022:

	Cost			Proceeds
Public corporation B shares	$	10,000		$	10,000
Public corporation C shares		47,500			14,000
Stamp collection		8,000			11,400
Jewellery		6,000			1,000
Boat		5,000			2,000
Stereo set		200			600

1. Alan had the following additional receipts in 2022:

Dividends from Canadian public companies	$	5,500
Interest on bonds		4,000
Lottery winnings		6,000

13. Alan paid out the following in 2022:

To purchase a computer for use at home when working on
his employers business	$	1,900
Interest on bank loan to purchase shares of public corporation		2,000
Interest on house mortgage (mortgage funds of $60,000 were used:
$40,000 for the purchase of the house, $20,000. for the
purchase of shares)		6,000
Lump-sum alimony settlement to ex-spouse		9,000
Tuition fees for attending university		1,000
Donations		4,000
Gift to a registered federal political party		1,000
Contribution to an RRSP		2,500
Annual dues to the provincial law society		1,700

Required: Calculate Alans net income for tax purposes for 2022. (Enter deductions with a minus sign (-). If a number should be zero, enter 0.)

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