Personal tax calculation problem -

Lisa Jonas - Personal Tax Information

Remember: The current tax year that you are preparing the taxes for is December 31, 2016. The prior tax year was December 31, 2015.

Carlos (age 48) and I (age 44) have numerous sources of income and deductions and we want to ensure we pay as little tax as possible.

We have two children: Sam (age 5) and Eric (age 2). During the year, we received the $1,920 universal child care benefit before the new Canada Child Benefit came into effect in July ; however, this was nowhere near the $17,000 of daycare expenses we incurred during the year. After taking a year off with Eric, Carlos decided not to return to his full-time job at a privately held Canadian company, VJuice Inc. (VJuice); instead, he returned to the workforce as an independent contractor for the Quebec Department of Health on January 4, 2016.

Carlos received contract income of $43,000 that was reported on a T4A slip as self employment income for the year. One expense he wants to claim relating to his contract is meals and entertainment of $4,000 (of which $1,500 related to "happy meals" he purchased for the family at a fast food restaurant). As you know, I am a senior executive at Modern. During the year, I received a salary of $325,000. My T4 slip also indicates the following:

Income tax $60,000

Group medical premiums 2,200

QPP contributions 2,737(max)

EI premiums 955 (max)

RPP contributions 6,000

Charitable donations 1,000

I also received a $10,000 bonus relating to 2016 on January 15, 2017.

I borrowed $21,500 from Modern in 2015 to fund a family trip to Jamaica. I don't expect

I will need to increase my shareholder loan account this year. Nothing has been included on my T4 for either.

All senior executives at Modern are provided with a leased vehicle of the employee's choice. I am leasing a Mercedes Benz. The monthly payment is $750, which includes $75 for insurance, all paid by the company. The original cost of the car was $55,000 (ignore GST/HST). During the year, I drove a total of 60,000 km, of which 18,000 km were considered personal. I use a company Visa card to pay for vehicle operating costs.

During the year, these operating costs paid by Modern totalled $6,500. I also received an allowance of $300 per month to cover any additional vehicle expenses that I cannot, or do not, put on the company's Visa. I am also reimbursed for various entertainment expenses incurred relating to business. During the year, I submitted $8,000 in receipts for entertaining clients.

Before starting his contract work, Carlos decided he had to have a new vehicle. He purchased a new minivan with full warranty when he started his contract at a cost of $25,000 (ignore GST/HST). He drove the van 50,000 km during the year, of which 32,000 km were business related. Expenses related to the vehicle for the year included:

Gas, oil changes and repairs $ 8,000

DVD player 1,000

Insurance 1,500

Parking tickets 500

Carlos also paid $2,000 of interest that he feels is not deductible for tax purposes. It relates to a personal line of credit that he used to purchase the van. Carlo's contract position with the Quebec Department of Health also involved working more than 60% of his time from home and he always met with department supervisors at home. Carlos used his home office, which took up approximately 10% of our home.

During the year, we incurred the following home expenses:

Mortgage interest $ 5,000

Property taxes 4,000

Electricity 3,000

Home insurance 500

Home office repairs 1,000

I also received some perks from Modern that were not included on my T-4 slip. Modern paid 100% of the premiums for my group disability insurance ($2,500 per annum), as well as my personal life insurance premiums ($1,500 per annum). Modern has a company condo in Cuba that all senior executives can take their family to for one week per year. Similar accommodations in Cuba would cost $5,000 if I had to pay for them myself. I have taken my family there the past three years. The company also provides support to the employees for professional development. I took one $3,000 course during the year on "Effective Leadership."

Four years ago, VJuice issued options to Carlos to purchase 2,000 shares in the company for $10 a share, which was the fair market value at the time the options were granted. In September 2014, Carlos was excited because the shares were worth $20 each, so he exercised the options. To assist with the debt repayment associated with the purchase of the new house, he sold these shares to his old boss in October 2016 for $35 each.

My 2015 Notice of Assessment shows that my 2016 RRSP deduction limit is $15,000. On December 31, 2016, I made an RRSP contribution of $10,000 to my own RRSP and $4,000 to a spousal RRSP. I made an additional $5,000 contribution to a spousal RRSP on April 1, 2017. In addition, my Notice of Assessment indicated that I had undeducted RRSP contributions from 2015 of $4,000.

We sold our home on July 28, 2016, for $850,000. We had originally purchased this house for $375,000 10 years ago. We also own a cottage worth $650,000 that we purchased in 10 years ago for $200,000. We are planning to continue owning this property as our family cottage.

I bought each of the children 1,000 shares in Lafayette Limited when the stock was trading at $5 per share. These shares paid eligible dividends totalling $1,000 (or $0.50 per share) in the year. In November, I decided to sell these shares for proceeds of $6 per share. I then took the proceeds and invested it into an RESP for each child. By the end of 2016, each RESP had already earned $500 of income from its stock portfolio.

We also have a significant investment portfolio held at a financial institution, which provided the following information:

The CDN investment account held jointly between us is the result of contributions from both of us over the years. I currently have a net capital loss carry-forward of $2,500 (incurred last year). We are proud of our investment record. This is the only loss we have ever incurred in our portfolio. Otherwise, even after taking into account all investment expenses, we always make money. Neither Carlo nor I have ever claimed the capital gains exemption.

With respect to the investments we have incurred the following expenses:

Investment management fees - CDN Account (Joint) $5,000

U.S. withholding tax - U.S. account (Lisa) 450

RRSP management fees (Lisa) 1,000

Interest paid on investment accounts (Lisa) 500

Interest paid on RRSP loan (Lisa) 250

I also sold the following property during the year:

Description Proceeds Cost

Sailboat $12,000 $30,000

Coin collection $10,000 $4,000

During the year, we also incurred the following expenses:

Cholesterol testing $ 500

Political contributions 1,000

Membership fees - Nobody's Gym 2,000

Family dental expenses 3,000

Carlos purchased a rental property in 2014 equally with his best friend, Guru Patel. Due to the picturesque location, the property initially provided the pair with significant income; however, by late 2016, due to rezoning and construction in the area, this wasn't the case. In 2016, they collected rents of $15,000. Expenses included $7,000 of mortgage interest, $6,000 of property taxes, and $10,000 for upgraded windows. The ending 2015 UCC balance on the building was $105,000. Carlos and Guru are unsure of the future rental market in this area and suspect they may not be able to earn sufficient rent to pay expenses, but will still continue to deduct any excess expenses against their other income.

I thought that I was going to be late filing my taxes and I was nervous that I was going to owe a significant amount of tax, so I made an instalment payment a few weeks ago of $5,000.