Molly live in Canada, She is a single parent with two kids the age of 4 and 7. S

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

Explanation / Answer

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.

Net employment income

Particulars

Amount ($)

Employment income is taxable income

20000

Less: Federal tax withheld

1200

Net employment income

18800

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