Case #1 [THE FOREMAN FAMILY]

©Copyright HTK Consulting

Lisa Foreman, who is a programmer at CIBC Asset Management, is a good friend of Mark Simpson, a

partner at HTK Consulting. She has always gone to Mark for all her accounting needs, including the

preparation of her family’s personal tax returns (T1).

You, are a Staff Accountant at HTK Consulting, and you report to Mark Simpson.

Mark felt that the comprehensive nature of the Foremans’ tax return would provide you with good

experience. He assigns you to complete the Foreman family’s 2017 Personal Tax Return (T1)

You were eager to start this tax return. You open up last year’s (2016) tax return and got an idea on what

to expect and saw what you needed from the client.

You then gathered the following information/documents to help you prepare the 2017 T1 Return for the

Foreman Family:

List of information/documents:

EXHIBIT 1 – CLIENT INFORMATION (INCLUDING FAMILY INFORMATION) ................................................ 2

EXHIBIT 2 – T SLIPS FOR LISA ...................................................................................................................... 4

EXHIBIT 3 – CAPITAL TRANSACTIONS ......................................................................................................... 8

EXHIBIT 4 – RENTAL INCOME ..................................................................................................................... 9

EXHIBIT 5 – INFO ABOUT LISA’S SELF-EMPLOYED EARNINGS .................................................................. 10

EXHIBIT 6 – LISA FOREMAN’S 2016 NOTICE OF ASSESSMENT ................................................................. 11

EXHIBIT 7 – RRSP CONTRIBUTION SLIPS ................................................................................................... 12

EXHIBIT 8 – EXPENSES INCURRED & DONATIONS .................................................................................... 13

EXHIBIT 9 – INFO TO PREPARE PINK FOREMAN’S T1 ............................................................................... 14

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EXHIBIT 1 – CLIENT INFORMATION (INCLUDING FAMILY INFORMATION)

Client Information

Full Name Lisa Foreman

Gender Female

Marital Status Married

Born August 8, 1965

Address 123 Main Street, Toronto, ON M2K 3E2

Has this address changed from the previous time?

No

Phone Number 416-888-8888

SIN 545 458 556

Canadian Filing position Resident – Full year

Province of Taxation Ontario

Are all members (including you) Canadian citizens?

Yes

Do you authorize CRA to provide Elections Canada your info?

Yes

Did you or your spouse dispose a principal residence in the current year or after the end of the current year?

No

Are you and your family members registered for the CRA online mail service?

Yes

Any foreign properties held by you or anyone else in family

No

Spouse Information

Spouse Full Name David Foreman

Born June 5, 1960

SIN 454 645 664

Canadian Filing position Resident – Full year

Province of Taxation Ontario

Date in/out of Canada N/A

Additional Information N/A

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DEPENDENT (CHILDREN’S) INFORMATION:

Dependent 1 – Daughter

Full Name Pink Foreman

DOB January 1, 1995

SIN 956 563 266

Additional Information Pink is a full-time university student and works part time

Dependent 2 – Son

Full Name Ian Foreman

DOB March 3, 2009 (age 8)

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EXHIBIT 2 – T SLIPS FOR LISA & DAVID

5

6

7

8

EXHIBIT 3 – CAPITAL TRANSACTIONS

Scotia iTRADE

500 Bay Street

Toronto, ON

M5W 0G4

Foreman, Lisa & Foreman, David Account: 5565658865CF

123 Main Street

Statement Period: 1/1/2017 to 12/31/2017

Toronto, ON Currency: CAD

M2K 3E2

Date Units

Bought Units Sold Description Price

Amount debited to

your account

Amount credited to

your account

01/16 100.00

Pan American Silver Corp. $34.57 $3,457.00

02/16 30.00

Apple Inc. 356.85 10,705.50

03/16 35.00

Coeur d'Alene Mines Corporation 31.44 1,100.40

10/16

15.00 Apple Inc. 422.00

6,330.00

11/16 20.00

Goldcorp Inc. 51.70 1,034.00

TOTAL 16,296.90 6,330.00

Capital gain calculation on sale of Apple Inc. shares Proceeds of Disposition ($422.00 * 15) 6,330.00

Adjusted Cost Base ($356.85 * 15) 5,352.75

Capital Gain 977.25

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EXHIBIT 4 – RENTAL INCOME The Foreman’s rented out their basement to a family. The basement occupies about 20% of the total

square-feet of the entire house. Lisa and David jointly own the home. Their rental revenues and expenses

for 2017 are as follows:

RENTAL INCOME

Gross Rent

$ 9,600

Advertising - newspaper

500

Office expense

600

total personal portion

(80%)

Insurance…………………………… 2,400 (1,920) 480

Interest on mortgage………… 10,000 (8,000) 2,000

Maintenance and repairs…. 9,000 (7,200) 1,800

Property taxes…………………… 6,000 (4,800) 1,200

Utilities……………………………… 8,000 (6,400) 1,600

Total expenses

8,180

Rental Income

$ 1,420

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EXHIBIT 5 – INFO ABOUT LISA’S SELF-EMPLOYED EARNINGS Lisa is a computer programmer and on the weekends and evenings she has a web designing business

whereby she builds websites for several clients

She gave you the following details for the 2017 fiscal year.

o Business Name: Lisa Web Designs

o NAICS Code: 541510 - Computer Systems Design and Related Services

o Address: same as above (home) – her office is in a room in her house which is approx. 20% of the

home (when you compare the square ft)

o Fiscal year: January 1 – December 31

Sales $ 10,000

Operating Expenses: Advertising $ 500

Meals and Entertainment 1,000

Accounting fees 400 Supplies 500

telephone & utilities 1,500

property taxes 1,200

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EXHIBIT 6 – LISA FOREMAN’S 2016 NOTICE OF ASSESSMENT

Line Summary Amount

150 Total Income……………………………………………... 162,900.00

Deductions from total income…………………… 20,000.00

236 Net Income……………………………………………........ 142,900.00

6150 Total Ontario non-refundable…………................

tax credits

934.03

420 Net federal tax…………........…………........................ 28,058.61

428 Net Ontario tax…………........…………........................ 16,691.68

435 Total payable…………........…………............................ 44,750.29

437 Total income tax deducted…………........................ 52,000.00

482 Total Credit…………........…………........…………....... 52,000.00

(total payable minus total credits………….. -7,249.71

Balance from this assessment…………................ CR 7249.71

Unused Net Capital Losses after 2000 5,000.00

Calculation of 2017 RRSP Deduction Limit

2016 RRSP deduction limit ……………………………………………………...………….. $24,500

Minus: Allowable RRSP Contributions deducted in 2016 ................................................ 10,000

Unused RRSP deduction limit at the end of 2016 ….................................…................... 14,500

Plus: 18% of 2016 Earned income of $162,900 = (Max $26,010) $26,010

Minus: 2016 Pension adjustment …………………….………. $10,000 $16,010

Minus: 2016 net past service pension adjustment ……………………………………………… $0

Plus: 2016 pension adjustment reversal …………………………………………………………. $0

RRSP Deduction limit for 2017 ………………………….………………………………………... $30,510

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EXHIBIT 7 – RRSP CONTRIBUTION

Lisa has an RRSP account in Franklin investments and made $8,000 contribution on February 28, 2018, and

$12,000 on December 31, 2017 to her account#12588545454

David didn’t make any contributions this year.

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EXHIBIT 8 – EXPENSES INCURRED & DONATIONS

1) Lisa paid $1,000 to the Engineering Association of Canada for Professional Dues

2) Lisa paid Yonge Street Mission Day Care in the amount of $12,000 for daycare services for Ian, while

she went to work. She was issued the following form:

3) Mortgage Interest Payment – 10,000

SUMMARY OF DONATIONS

MADE TO: MADE BY: AMOUNT DATE OF DONATION United Way David Foreman 1,500 8/15/2017 Canadian Cancer Society Lisa Foreman 2,000 1/15/2017

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EXHIBIT 9 – INFO TO PREPARE PINK FOREMAN’S T1 - Pink Foreman worked part-time at Red Lobster as a waiter and earned $12,000 (please see T4 Slip) - Lisa wishes to claim Pink’s (Daughter) maximum tuition credit available - During 4 months at University, she lived in a residence near university at 12 Collins Drive,

Scarborough, ON M1C0C2 and paid $1,600 rent.

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Back of T2202A…

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PINK’S NOTICE OF ASSESSMENT

Line Summary Amount

150 Total Income……………………………………………... 10,000.00

236 Net Income……………………………………………........ 10,000.00

6150 Total Ontario non-refundable…………................

tax credits

505.00

420 Net federal tax…………........…………........................ 0.00

428 Net Ontario tax…………........…………........................ 0.00

435 Total payable…………........…………............................ 0.00

437 Total income tax deducted…………........................ 0.00

482 Total Credit…………........…………........…………....... 0.00

(total payable minus total credits………….. 0.00

Balance from this assessment…………................ 0.00